From the Wall Street Journal: In the 1880s, Thomas Edison backed direct-current electricity against the alternating-current system favored by Westinghouse, his great competitor. As a scare tactic, he persuaded New York state to buy Westinghouse’s high-voltage AC system for its new electric chair. “Kemmler Westinghoused,” ran the grisly 1890 headline, reporting the capital punishment of murderer William Kemmler.
As Edison came to learn, changing the course of technology can be as hard as inventing it. Alternating-current electricity — transmitting power over great distances and at low cost — won the day, and Samuel Insull, a former clerk of Edison’s, consolidated the production of it, making electricity a utility, available wherever there was a power cord. Naturally, factory owners stopped buying Edison’s steam engines and dynamos once they could rely instead on a shared power grid. Over time, ever more consumers on the grid resulted in even lower costs and profound innovations in American life: from assembly lines and stock tickers to mass entertainment and the knowledgeworker economy.
We take so much of this network effect for granted that we don’t really think about it anymore. When we use a toaster, we don’t speak of “going onto the electrical grid.” Soon, Nicholas Carr argues in “The Big Switch,” we may no longer think of ourselves as “going onto the Internet.” The Web’s services will be as ubiquitous, networked and shared as electricity now is. He predicts that we’ll get into the habit of entering a “cloud” of computing, accessing services provided by Google, Facebook, Salesforce.com and innovators yet to come, no longer tethered to whatever software may be loaded onto our own computer.
Just as Edison’s business model failed, Mr. Carr argues, so will Bill Gates’s — i.e., Microsoft’s emphasis on licensing Windows and highly profitable applications like Office for each of the personal computers in a company. The “big switch,” Mr. Carr says, will put more and more such products and services on the Web. In “The End of IT” (2004), he argued controversially that, for most firms, investing substantially in information technology did not make sense, since IT could no longer deliver competitive advantage. Actually, just about every industry has a well-known leader that still extracts competitive advantage from its own information technology, usually from clever software rather than hardware. But it is true that companies increasingly depend on off-the-shelf applications rather than large-scale custom efforts.