It’s the season of sharing

According to observers of certain political persuasion the US is descending rapidly into a socialist state. It may be the impact of a social movement, labeled “collaborative consumption”, carried by people who hold a strong belief that sharing and thereby optimizing capacity leads to human betterment. They are recycling concepts that have been around for ages.

In the late sixties, when sharing was taken to the extreme, the hippies in Amsterdam introduced the “white bicycles” program. Around 2,000 bikes, painted white to distinguish them from regular ones, were declared to be collectively owned and available for use on short trips. Obviously there was too much temptation to transfer ownership from the collective to the individual and the program became a failure. But in the last couple of years the same concept has been successfully resurrected in many European cities. This time they are applying technology, such as creditcard-activated locks, to prevent unauthorized use. Zipcar in the US and Greenwheels in the Netherlands have taken the white bike concept to cars. These companies see themselves as car sharing rather than rental companies. They operate on a membership basis and offer easy access to cars, which are parked at designated spots in major cities. Members can reserve them online or pick up any available one. A card is used to access the vehicle, which is equipped with GPS for tracking.

In the same sixties a new computing concept was introduced: Time Sharing. So called “service bureaus” provided businesses with computing power to run their applications. This approach brought down the very high processing cost of dedicated computers. However with the introduction of the micro chip, the emergence of mini-computers and PC’s and the gradual decline of cost, time sharing faded into oblivion. Computer power got distributed and everyone rushed out to buy and build their own software. Now this has come full circle.

Most businesses still own their Client Relationship Management software. It took a major investment in time and resources to get Siebel or equivalent running, typically millions of dollars and project durations of well over a year. Many of these projects failed to deliver the expected results. In the mean time, thousands of companies have found out that it makes more sense to share the soft and hardware required to run a CRM application and pay for usage only. Salesforce has recycled the time sharing concept. While doing this, Salesforce has become one of the fastest growing SW companies with a market capitalization of over $18 billion. Similarly Google is signing up tons of new enterprise users for its web-based Google Apps, replacing Microsoft’s clunky alternatives.
The Cloud is the big story: business applications will move to the Web and computing power is obtained from providers on a pay-as-you-go basis. Sounds familiar? Computer power will go the way of power: it will be provided by utilities. You will end up buying computer services instead of servers. Today, around half of the total cost of ownership of business applications is spent on IT infrastructure, such as servers and networks. The average server runs at around 15% capacity and has energy consumption at half of its optimum. With ever-increasing network speeds and capacity, computing power is moving back to the data center. Actually to giant datacenters, each housing thousands of servers. In the last couple of years companies like Microsoft, Google, HP and Amazon have been on a construction spree. By aggregating computer power demand across companies, industries and geographies they increase server utilization to around 80%. By bundling purchasing power, the cost per server is driven down. Power utilities have been around for over 110 years. In 1907 utilities produced 40% of the power. By 1930 this was 90%. On Internet time, we can expect this happen much faster with computer power.

Sharing has been around forever. Many people still rent instead of buy a home, lease instead of buy a car and we used to rent videos from Blockbuster (before it went bust). What is new is the fact that the Web enables sharing at a very low threshold, in a personalized way and with an amazing ease of use. According to The Economist: “access often matters more than ownership…technology will make sharing more and more efficient.”

Happy holidays!