Companies Reap the Flip Benefit of Moore’s Law

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Last week’s Economist has a couple of articles on technology in the recession, one which talked about how companies are now choosing cheap over powerful computing. Moore’s Law, which states that the cost of a given amount of computing power falls by half every eighteen months, has held true for decades and has allowed companies to acquire more technology for the same price. Now companies are opting for the same technology at a lower price. Netbooks, software as a service (saas), open source software and virtualization are among the technologies benefiting from this trend.

It will be interesting to see the IT strategies of various companies play out over this year. In the short term, we will generally see less innovation coming from IT, both from IT organizations within companies and from the technology providers that serve them (the exception being providers of software or services that drive down costs). IT will be less likely to drive strategy and more likely to support optimization and efficiency. Customization of software, for instance, will be minimized in favor of packaged applications installed “out of the box”. IT will be pushed as far as it can towards the commodity end of the strategic spectrum.

Assuming this swing in the pendulum lasts only a year or two, the industry could be positioned for a nice growth phase in the long term. IT organizations within companies will have optimized their spend and be ready to build on that foundation to use innovation for strategic advantage. Most everything that can be commoditized and standardized will, providing a strong platform for future investment.