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March 18, 2008

SES New York: Nick Carr Keynote

By Li Evans

Nick_carr_ses_new_york_keynote I was actually very interested in this keynote, as I was in London, where Nick Carr gave a shortened version of this keynote via video in London.  He covered a more high level version of this in London and Kevin Ryan pulled together a great bunch of people to have a discussion about Nick's video afterwards.

Today's keynote was Nick Carr in person, actually speaking to the SES New York crowd.  It's very interesting to hear an outsider's perspective on these revolutionary types of changes happening in the world that so profoundly affect the very essence that we as in industry do.  It's also refreshing to have someone not "bash" the SEO industry, but speak more to the fundamental issues at hand that our very industry creates - that of knowing how to tread the line of "liberation and manipulation".  Read on for my take on Nick Carr's keynote at SES New York.

As Kevin Ryan introduces Nick Carr, he mentions that a while ago Nick wrote a piece call "IT Doesn't Matter", it upset a lot of people, but a few people did take notice.  He's written for a lot of prestigious places, and has a new book "The Big Switch".  Microsoft most recently said something about it recognizes the world of computing is changing, Kevin states basically that Microsoft is just affirming what Nick Carr called a while ago.

Nick thinks we are at a historic turning point in the world of computing.  Not just for IT, advertising, etc.  but for culture and how we live our lives.  Computers are increasingly at the center of our lives, a fundamental change in the technology will have profound ripples in our lives.

Economic changes will change this, not just companies but our lives.  The ramifications will be across a lot of areas.  Looking out our own behavior over the last 5 years, compared to young people (teenagers), you can see that change already taking place.  We use to buy shrink wrapped software, now we find the data/software on the internet.  We bypass the process of buying and installing software on our computer.  Web 2.0 is about bypassing this process. 

Businesses have kept themselves at a distance from Web 2.0, looking at it as something that doesn't really apply to businesses.  Looking back 25 years, the PC was this way too, they thought it was "toy", but normal people used this.  This forced the companies to rethink this.  Thus the end of client-server era was changed.

The change we are coming into today, is even more wide sweeping than the PC revolution.  To see this effect, you need to look back to 1851, Henry Burden built a water wheel for his iron making plant, power generation was something every company needed to do on its own.  They have to invest in their own equipment.  Burden Ironworks became the primary supplier of horseshoes to the Union Army, and spikes to the railroads.  Later on the early 1900's the wheel had been abandoned, so what happened?

Suddenly companies didn't have to produce their own power.  They didn't have to run their own water wheel, there was a centralized place that produced the power.  For the business owners this was an incredible leap of faith to trust in this "centralized" place.  Power was incredibly central to these businesses.  As industrial companies grew and expanded, they expanded their complexity of their power generation.  These systems though were prone to failure.

After the new electric grid arrived.  In 1910 only 40% was supplied by utility by 1920 it was 80%.  A radical change happened when an economical means mattered to the business.  As soon as you moved to the central supply, you drove down the price.  There was an explosion of innovation at the socket.

Henry Ford, in 1915 created the electrified assembly line and cut down the price of a car to $200.  This happened all over the country and world.  Everything from refrigerators to vacuum cleaners.  It ultimately affected media, entertainment and news.  Everything in how we communicate with each other.

Computing is next.  It's already going through a similar change.  Going from each of us buying installing and maintain software, to a central computing "cloud" model.  We will now "plug into" a shared grid.  If you look at this at an economic level, you'll see this is very similar, a general purpose technology.  The innovations are unlimited, basically your own mind limits it.  We saw it with electricity and now we see this with software/hardware, very similar pattern.

The pattern of computing was established in the very early 1900's.  As the century progressed, this has become the core.  The application and power of computers has grown.  In the 19050's and 60's along came the Mainframe.  It was very efficient.  It would operate at 90% of its capacity.  It's biggest drawback was that it was impersonal.  As soon as the PC was introduced, everything changed. 

Forget about the nice clean main frame room, now we have the server room.  The client server system is the mirror opposite of the mainframe.  But in a way it's made computing incredibly inefficient. Every business has to provide their "own computing" on a huge scale. There's incredible inefficiencies.  80% of a server's actual capacity is wasted.  Labor shows the same, 70% goes to upkeep.  Its just a cost of doing business everyone has to pay - no competitive advantage.

We are at the verge of having the ability to distribute computing centrally.  Google is building giant data centers across the united states and world, Microsoft is playing catch up as well.  There is a massive build out of the computing grid.  This is going to transform computing just like the electric grid changed things.

Why Now?  A number of things have changed now to make this possible and inevitable.  Two laws show this - Moore's Law (the power of computers is going to double every month), and Grove's Law (the capacity of network communication power only doubles once a century ). 

With the build out of the broadband internet, suddenly the capacity of the network is catching up to the computing power.  Now you can deploy sophisticated services central over this rich new grid.  Eric Schmidt predicted this back in 1993, "when the network becomes as fast as th3 processor, the computer hollows out  and spreads across the network."

This isn't theoretical occurrence, we see this with the growth of Web 2.0.  We are now seeing massive investment into these small companies and bigger companies.  Amazon Web Services, Workday, 3Tera, Windows Live, TMobile systems, Salsforce.com, SAP Business ByDesign are all examples of this.

So What does this mean?  Just like the electrical socket brought a wave of innovation, so will this.  We'll have the network available anywhere, and we'll be able to tap into it with more than our computers, and smart phones.  One of the first areas its felt is rethinking/reworking corporate IT.  As big companies move into this "Cloud computing", it will push down the price of computing for everyone.

Quality of cloud computing is built on the assumption that data is to be shared, before this it was isolated.  That lead to a big problem with IT systems.  The value is when you can choose business partners to share information with easily.  Every person in business is going to be challenged to harness these very cheap computing power, software is basically becoming "media".  The success of consumer software is now measured by the audience you are able to attract and your ability to monetize that attention.

Nick_carr_ses_new_york_keynote_slid Big opportunities for everyone, including big computing companies to move into traditional media areas.  Media companies need to adapt by increasing their computing skills to keep up.  The web democratizes media, but it also creates enormous incentives to consolidate infrastructures. 

As soon as you begin to translate businesses into software, "the workerless" company is created.  You can now run very large companies, with very very few employees.  Skype is an example of this, it was serving the same number of people as British Telecom, but with only 200 employees.  YouTube is the same, they only had 60 employees, Craigslist has 20 employees and PlentyOfFish has just 1.  The global reach of these companies, radical automation,  increasing returns to scale and user generated content all contribute to companies being able to work like this and be successful.

As the software power is deployed more and more, we'll see an increase of personalized media.  It also raises concerns about receiving media on our previous actions.  There also increases the polarization.  It doesn't necessarily create "social harmony".  Consumers as prey, the issues of privacy and free will arise.  We see that people's entire lives are laid out in the search terms we use.

"My goodness, it's my whole personal life.  I had no idea somebody was looking over my shoulder"  Therma Arnold (she was the person identified from the AOL data release a few years ago).

The World Wide Computer - liberates us, but also controls us.  We need to think about this in the SEO World.  As we have this centralizing happening, we'll constantly see a tug of war with the liberating side and controlling side.  How do we tread the line of liberating and manipulating - "Which side are you on?"  Is the question Nick leaves us with.


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