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Interop Why isn't IT getting cheaper instead of more expensive? That was the question posed by Jim Whitehurst, president and CEO of open source software juggernaut and cloud wannabe Red Hat, during his keynote at the Interop networking — and now cloud computing — trade show in New York.

After all, processor and storage capacity keep tracking along on their respective Moore's and Kryder's Laws, doubling every 18 months, and Gilder's Law says that networking capacity should double every six months. Those efficiencies should lead to comparable economies. But they're not.

Simply put, Whitehurst's answer to his own question is that IT vendors suck, and that the old model of delivering products to customers is fundamentally broken.

"Functionality should be exploding and costs should be plummeting — and being a CIO, you should be a rock star and out on the golf course by 3 pm," quipped Whitehurst to his Interop audience.

The existing model of how IT vendors deal with IT departments is broken, says Whitehurst, and this is why — given the failure rate of IT projects and the bloatware of functions that software and hardware companies alike deliver on five-year product cycles (a lot of which are never used)— he conservatively estimates that out of a $1.4 trillion global IT budget, at least $500bn is utterly wasted.

"And the deadweight loss to society is much higher," says Whitehurst — probably something on the order of $3.5 trillion once the ripple effects of this waste are taken into account.

Whitehurst didn't mention that this waste provides $500bn worth of jobs, and that these also have a multiplicative effect, so it could be a wash. But I digress...

The problem, says Whitehurst, is that IT vendors try to predict the future many years out, and design their products for big-bang upgrades far into the future. This stands in stark contrast to the iterative and more modest product cycles of providers of open source products and online applications.

Whitehurst compares the iterative model to kaizen, the Japanese business philosophy of continuous improvement that lead to the lean manufacturing techniques first developed at Toyota, and which are now nearly universal in manufacturing.

With lean manufacturing, you work in small groups, you share designs up and down the supply chains, and you make incremental changes in products and improve them gradually. This results in fewer manufacturing defects.

Similarly, the kaizen-like approach to software development embodied in open source projects (as well as in services such as Salesforce.com) have lower levels of software defects than big-bang software products. Whitehurst claimed that he could show that Red Hat's own development efforts had an order of magnitude fewer defects per lines of code than big-bang efforts, thanks to the open source model.

There is also an element of aggressive cost cutting to kaizen, which Whitehurst didn't mention. But he did say that when Delta Airlines was in bankruptcy at the time he was CIO at the company, the one place that it was nearly impossible to cut costs was the IT department because of the nature of the products and the licensing and support contracts with IT vendors.

Vendors who understand IT's real problem have a chance to fundamentally transform IT during the cloud revolution, said Whitehurst. The transformation of IT currently underway as we move toward virtualized infrastructure that moves around the data center and bursts out to other clouds, he suggested, can be as transformative as the move from mainframes to distributed systems.

"This is going to take decades to play out, so this is a long, long, long term shift," Whitehurst said. But he cautioned that we have to put pressure on IT vendors so we don't end up with "DEC 2.0," referring to the proprietary minicomputer revolution in the 1970s and 1980s and the consequent Unix revolution in the 1980s and 1990s that still left us with server and application silos.

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