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Tech: Where the Last Are First

By Nicholas G. Carr Over the last 50 years, anyone who wanted a sense of the future of business computing could simply look at what the heavy hitters were doing. Building or buying new systems required a lot of capital, and only the largest and best-funded companies could afford cutting-edge technology. Smaller organizations would wait until costs came down, then follow dutifully in the footsteps of the big guys.

But that old pattern is being turned on its head. Today, many of computing's pioneering customers are small or midsize organizations without a lot of cash. They consist of not only businesses but also nonprofits, government agencies, and schools.

They still need to pinch pennies, but instead of waiting patiently for the prices of new systems to come down, they're taking an altogether different route. They're inventing a new model of computing built on cheap commodity hardware, free open-source software, and utility services supplied over the Internet.

DODGING LICENSE FEES. Look at Linux, for instance. Back in the mid-1990s, the city government of Garden Grove, Calif., shifted to the open-source operating system before most people had even heard the word "Linux." It made the switch because of budget constraints, and it never looked back.

Since then, governments have continued to rank among the most aggressive early adopters of Linux, used to run their servers and even their PCs. Some of the motivation, particularly in Europe and Asia, is political: Governments feel unsure about building their computing infrastructure on proprietary software owned by foreign corporations. But economics plays a part as well. Linux and other free programs provide a way to avoid the licensing fees that can quickly eat up meager public-sector budgets.

Small concerns are also leading the way in adopting hosted software -- applications that companies rent over the Internet rather than install on their own computers. Most of the early users of the Web-based customer-service programs offered by upstarts (CRM) and RightNow Technologies (RNOW) were small and midsize businesses.

RENT, NOT OWN. These modest outfits couldn't afford to purchase big-ticket software packages and the servers required to run them, so they happily experimented with a cheaper alternative when it came along. Now the hosted apps are going mainstream -- and RightNow are eating away at the market once controlled by giant Siebel Systems (SEBL).

A similar story is unfolding on the hardware side of utility computing. Renting processing power and storage capacity from outside suppliers appeals to smaller concerns in particular because it allows them to avoid the big capital expenditures, labor costs, and maintenance headaches that go along with running a private data center.

Lincoln Center, the nonprofit arts entity in New York City, uses computers operated by IBM (IBM) to manage its Web site and ticket sales. David Weekley Homes, a privately held builder based in Houston, recently moved most of its servers into a facility owned by utility supplier VeriCenter. "We didn't want to be in the technology business," explains Heather Humphrey, chief information officer of David Weekley Homes

Being IT pioneers hasn't always been easy for these organizations. Plenty of glitches have occurred along the way. Town officials of Munich, Germany, for instance, made headlines when they announced plans to replace Microsoft's (MSFT) Office suite with the free OpenOffice on 16,000 government PCs, although progress in carrying out the plan has been slow, hindered by technical and political challenges.

ELECTRIC PRECEDENT. But that's the point. Smaller organizations are willing to endure the growing pains of immature technologies because the potential cost savings and other benefits hold so much allure for them. Sometimes they succeed, sometimes they don't. But in the process, they push the new technologies ahead -- until they turn stable and flexible enough for bigger users to adopt them.

The IT developments mirror what happened with electricity a century ago. In the early years of industry's electrification, small companies had to stand on the sidelines as larger counterparts constructed expensive private generators to power their machinery. But then, as electric utilities popped up, the smaller outfits purchased kilowatts over the new public grid first. They may not have realized it at the time, but they were defining the future of electricity in business.

As we move into the next business-computing era -- that of cheap components and utility supply -- once again, the laggards are leading the way. Carr is the author of Does IT Matter? and publisher of the Web log Rough Type

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