Hal Stern's thoughts on the economy, software, services, technology, and snowmen. Hal Stern: The Morning Snowman

Growth (and demand) are good, but profit is better. Explosive growth with no profit only leads to bubbles, not sustainable markets. Give me eBay over pets.com any day, because eBay has a profit model. Models are nice, but mechanisms to monetize them are even better. Creating profit out of an explosive growth model means taking the cost out, and often that requires establishing well-known - and socialized - standards with which to compare costs.

Here are two short-lived examples of monetary standards invented to remove the cost of creating useful legal tender. Fractional currency entered circulation due to a shortage of coins post-Civil War; it replaced postage stamps as a means of small-denomination payment. Shortly after that, with silver prices dropping amidst new mining of the precious metal, the government minted the trade dollar. One of the heaviest silver coins ever producted, trade dollars fluctuated between bullion value and face value, often to the detriment of someone receiving a one as payment. Without well-defined standards for the trade dollar's value, it lost favor domestically and eventually lost its status as legal tender.

Points of today's numismatic detour: Items of value that are easily identified and exchanged are fungible assets. Items of value that are hard to value or exchange create cost headaches. Why I care: As CTO of Sun Services, my team is chartered to create new IT infrastructure models that fix the total cost picture -- not just acquisition, but operational cost over long periods of time. Server assets are not fungible -- you can't easily trade a 2-processor web server for half of a 4-processor web server without a serious investment in security, containers, virtual networking, and resource management. But take virtualization technologies (Solaris 10 containers, resource management, Nauticus VLAN creation, Solaris Security Toolkit features), and apply best practices for management, and you start down the path of making server fractions exchangeable. My job is to keep IT infrastructure from becoming the equivalent of the trade dollar -- heavy, of uncertain value, and hard to exchange at a fair rate.

Next on my list is investigating the software deployment models, instrumentation, and the metering engines needed to create the profit model around the demand model. With models like the dollar per CPU-hour, Sun can attack IT infrastructure delivery the same way Pratt & Whitney does jet engine delivery - we supply the thrust at a cost and weight, and bet on our engineering capabilities to assemble the solution so that it's profitable for everyone. When we say "scaling with technology", we're value engineering our ability to deliver a software stack, via a subscription model, that has a specific performance, service level, and capacity. The only way to solve for both Sun and customer interests is to remove operational cost -- which means more automation, more instrumentation, and fewer people. Anything else is adds cost and complexity, violating the eleven word koans and definitely touching a tender spot with those who fund IT.

My grandfather was a doctor in the coal-mining region of Pennsylvania until the mid 1940s. That's part of his office card -- note the 3-digit phone number. Not an area code, not an exchange -- the whole phone number was was a trio of digits. Any call outside the local exchange needed the operator do to the equivalent of a DNS lookup for you.

We're adding area codes to New Jersey today at an average of about one a year. In AT&T-ville, where we used to enjoy the "first" area code (201), we now have four area codes to cover a 40-mile radius of the Garden State. But that's not the growth vehicle - I have more IP addresses than phone numbers in my house at any time, and that's likely to increase over time. Anyone who bets on saturation or believes that a given communications technology has reached its full potential need only look at Dr. Peril's card.

One of the drivers of exponential growth is socialization of the technology. I'm betting on continued demand for IT infrastructure because of the growth in instant messaging, email, cell phones, video messaging, digital music and video distribution, on-line photographic print services, and the continued evolution of the content consumer as an equal content creator - even if "creation" involves editing out an ex-friend from a photo before sharing it. This view is taken to an extreme in the Museum of Media History's future of newsmedia.

The direct IT consumers in this world are those who create the content consumption and distribution markets; the end user or consumer is an indirect Sun customer. One example is our "powered by" partnership with Major League Baseball and the mlb.com site. Our existing customers and channels don't go away or shrink, but the manner in which they consume and deliver IT assets evolves as Sun hardware, software, services, and operational knowledge become ingredients in the media-rich network.