Back to the Future (of Tech)

Back when computers where a shiny new concept, the hardware and software were inseparable because of the immaturity of technology. The most powerful computers in the 1970s had less computing power than a smartphone has today. As hardware became more powerful and less expensive, tech companies began decoupling the software. This led to a software renaissance—ultimately giving rise to Web-based approaches that have transformed the technology industry, our social life, and business itself.

Once again, there is potentially profound change coming that will alter the way businesses use computers. Rather than create one-size-fits-all machines, computer systems increasingly are being custom designed to perform specific tasks. The most obvious examples are Google (GOOG), (AMZN), and Facebook (FB). These companies have built their own systems that are scalable and optimized to help them conduct (and invent) businesses: Google can support a seemingly unending number of Gmail customers; Amazon can rent out computing space without running out of room; and Facebook can support nearly a billion friends without skipping a beat.

They represent a new breed of companies—not simply technology purveyors—that create their own computing hardware and related software purposely designed to support the exact services they are delivering to customers. And they add tremendous amounts of automation so it takes fewer people to manage their computing environment.

CEOs began to notice a few years ago that these companies were able to produce results faster and at a lower cost than their own IT organizations. But Google, Amazon, and Facebook are not the only ones changing the way they offer computing services. This marriage of hardware with strategic software to work in concert on a specific task is becoming the business strategy for such companies as IBM (IBM), Hewlett-Packard (HPQ), EMC (EMC), and Oracle (ORCL). The business value is clear: It makes the products more efficient, easier to manage, and easier to change—saving time, personnel costs, and money.

Today, a new generation of systems is under way that incorporates best practices for a specific industry. A computer can be designed for a health-care research firm that needs to manage—and analyze—massive amounts of data but doesn’t manage commercial transactions, which require a different type of software and different level of performance. In another scenario, an online retailer may need to close transactions very quickly while keeping track of available inventory. The type of hardware and software combination will be very different than the heath-care organization’s needs. A hedge fund, on the other hand, may need a system that is tuned to analyze huge volumes of data to decipher patterns instantly.

This is a back-to-the-future trend that should excite corporate customers, but be cautious: The system has to have a flexible, modular design so the technology can evolve with the business. What helped to doom the digital dinosaurs of an earlier computing epoch was an inflexibility that locked customers into a technology approach that was difficult to alter as market changes dictated a new approach to business.

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