On-demand as a Strategy: Zip cars and IT Applications

Let me start out with full disclosure. I currently make my living on the On-Demand trend in Information Technology, so I have a pony in this race. I work for a company called Appirio, a San Mateo start-up, whose slogan is: "We offer services AND products to accelerate the adoption of on-demand solutions."

My first week at Appirio, our tireless CEO, Chris Barbin, gave all employees a copy of The Big Switch by Nicholas Carr, which I devoured on my flight from SFO to ORD. While I found Carr to be a bit dystopian in his vision of the future (I am an eternal optimist) his description of the trend of On-Demand seems to be right on the money.

Think of how electricity was first adopted. If a factory back in the day wanted to use electricity to run their operation, they literally had to build their own generator. This required a massive amount of equipment, skill, maintenance, and capital investment. Fast forward a few years, the electric utility company came on the scene. If a factory needed electricity, they merely plugged their tools into the wall. Factories then could concentrate on what they do best, while a centralized electric company served up the power in an on-demand fashion. This is something we now take for granted.

These last few days I have had an incredible front-row seat to the on-demand movement. The question I asked myself was, is "on-demand" really just another trendy idea that will come and go (like parachute pants in the 1980's)?, or is this an actual movement in how we live and do business (like electricity generation)?

On Saturday, my Managing Services Organizations class hosted Scott Griffith, Chairman & CEO of Zipcar. Zipcar's members pay to have the ability to use a well-maintained and fun vehicle when they need it. "Zipsters", as Zipcar members are called, typically fall into two categories: those who want to save money by not paying for the maintenance, insurance, parking, that comes with car ownership and secondly, people who resonate with the environmentally friendly and communitarian spirit of Zipcar.

On Sunday I taught a class on GMail and GCalendar to an American multinational's offices in Asia. When a company moves their email (the lifeblood of a corporation) to Gmail from Lotus Notes or Microsoft Exchange, they place the burden of running servers, upgrading, and provisioning onto Google. Just like the factory places the burden for generating electricity onto the utility company. Just like the Zipster places the burden of oil changes on Zipcar.

On Monday I attended the Chicago Cloudforce Conference, a meeting put on by Salesforce.com to connect to their customers and partners in the Chicago area. Salesforce is revolutionizing the IT world (along with other companies like WorkDay and RightNow), by taking firms' IT applications to "the cloud". I was struck by the similarities between the messages of Salesforce CEO Marc Benioff and Scott Griffith: why install your own applications (buy your own car) when you can get better applications (better car - in some locations you can now get a BMW 5 series from Zipcar) without all the maintenance costs and headaches?

Zipcar has taken over 100,000 personal cars off the road. Who knows how many personal servers Salesforce has taken offline? Zipsters know what Saleforce's customers know: on-demand allows them to concentrate on what they do best, as well as allowing them to do more for less money. Both groups know the true cost-of-ownership.

I have concluded from this week that this trend in On-demand spotted by Nicholas Carr is not another bunch of hype. I am not a parachute pants salesman.

- John Gorup, Chicago Booth class of 2011.

Note, for further reading take a look at my friend David Schach's commentary on Zipcar.