I’ve been doing a lot of research and reporting lately on how a growing number of CIOs are actively exploring the possibility of sharing software, infrastructure and IT services with their peers as another path to cost savings and efficiency gains. While the notion of inter-enterprise shared IT services has been considered and batted around in different forms for years, there are several reasons to believe that the time for what IT economics expert Howard Rubin has coined as ‘Technology Commons’ has finally arrived.
As Rubin and several CIOs point out in a new CIO Magazine cover story on the topic, the proliferation of high-bandwidth networks -- coupled with the emergence of cloud computing and the expansion of the open source movement -- have laid the foundation for making shared IT activities between organizations feasible. CIOs in several industries are currently exploring the potential for sharing IT resources between one another, including the world’s top hotel groups, the nation’s top 25 research universities as well as players in the real estate and insurance industries.
For example, one of the options being considered by a group of hotel operators which include Starwood Hotels & Resorts Worldwide and InterContinental Hotels Group is the possibility of sharing a common hotel reservations system to help reduce their transaction processing costs. Although the discussions are early-stage, it’s an intriguing development for a group of companies that have historically tried to use these systems to differentiate themselves on how they calculate room rates and availability for customers.
Going forward, tech commons may offer a better fit for more mundane types of business operations. For instance, if you’re the CIO of an international re-insurance company, operating and maintaining a general ledger system isn’t core to your organization’s business. For routine but necessary business functions like this, Tech Commons could become an appropriate alternative.
For any type of Tech Commons to work, there are significant legal, security and other types of issues that would have to be addressed. For instance, any group of organizations that attempted to share a commercial software system would have to work through licensing and usage rights with the provider. Meanwhile, commons participants that elect to set up a third-party entity to operate a shared IT service for them would have to agree on how to structure, staff and fund the business.
Most CIOs I’ve spoken to on this topic believe that an LLP or LLC-type organizational structure would probably work best for a shared IT service since it probably would be too much of a distraction for most IT organizations to operate such an entity themselves – particularly if the operation or activity isn’t core to their company’s business.
There are a lot of factors for CIOs to wade through when considering different applications and options for shared services. Still, many CIOs I’ve interviewed on the concept of Tech Commons believe that it’s an idea whose time has finally arrived.
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