Why buy cows when all you need is milk? Have you noticed how no-one buys any server hardware anymore?

In fact, I can’t remember the last time a company or corporation actually shelled out for infrastructure, except for being connected to the ‘net.

IBM, Dell and HP now only have three customers for their servers – besides the banks and a few other paranoid institutions. Everyone else just uses Amazon S3, Elastic Cloud, and all the ‘free’ space, mail, and services from Google and eBay.

It’s logical after all – why pay for a commodity like web servers, processors and disk space, when you can get the service from Amazon for next to nothing – benefiting from their incredible economies of scale?

Google has been offering free blogs, domain hosting and mail for years, and now YouTube and mainstream news services are also hosted on Google. eBay and its subsidiaries PayPal and Skype provide all the CRM and eCommerce you could wish for.

“We just launched a new online multi-media business,” said tech innovator Gareth Brody. “Our data storage is on S3, system processes on Elastic Cloud, shop-front on eBay, and payment gateway with PayPal. Our development came from a Pakistani software house, using open-source technologies.

I don’t know if IBM or Microsoft gets a dime from us. I don’t really care.”

Stocks in IBM, Dell, HP and Sun are sure to take a massive hit as customers and investors realize that virtual is the new reality. Software vendors will be next to feel the crunch.

ANALYSIS >> SYNTHESIS: How this scenario came to be

The Tipping Point
When computing power, data storage, connectivity and all the integration that is required to make them deliver a business process can all be purchased as standardized services, on demand, then there is little reason to invest in traditional data-centers, server hardware and network infrastructure. When these services become commoditized, reliable and popular, the tipping point has been reached and the innovative approach to using technology becomes the new ‘business as usual’. We are reaching this point right now.

If you were building a new business in the knowledge economy today, would you buy a server?

2000: Microsoft launches Windows 2000
Bill Gates introduces his new product to the world in San Francisco amidst great fanfare and excitement. Although he might not know it, we are at the end of the world as we knew it, and the new world is about to begin.

Windows 2000 was the best yet, with more stability, user-friendliness, compatibility and internet integration than ever before, and became the benchmark for desktop operating systems. Some say it was also the beginning of the end for desktop computing, and heralded the era of mobile, wireless and web-based applications.

2004: Google goes great
Google files for its IPO. It’s just the start of something big, and Google becomes the darling stock of the new internet boom, as profits mount year on year.

2005: eBay expands
eBay, which bought PayPal in 2002, makes another strategic acquisition by buying Skype. This expands the eBay network of customers by 100 million around the globe, offering opportunities for online commerce and financial services in the future.

Making Skype a legitimate, corporate asset changes the way the world views long distance voice communication, forever. Online stores and services start using Skype as a convenient, even preferred way of communicating with their customers.

2006: S3 and the Elastic Cloud
Amazon Web Services launches Simple Storage Services (S3). Just rent the data storage you need from Amazon, on demand. Amazon also introduces the beta phase of Elastic Compute Cloud – the same principle applied to virtual servers.

Amazon, Google and eBay’s physical server farms continue to grow, daily. Gmail users now get gigabytes of storage for every mailbox, growing automatically, virtually uncapped. Google also introduces applications for your domain, including web hosting, email administration and office applications – all for free. Initially targeted at small companies, a premier edition is released for corporations at low cost per user.

2007: Virtual businesses
As virtual services become increasingly commoditized, Silicon Valley start-ups create new businesses with zero IT investment. Companies like Truemors and vator.tv are brought to market in record time and without creating IT shops, lowering their risk exposure and encouraging other start-ups.

The Observer reports:

“Why is virtualisation such a big deal? Basically because the world cannot do without it. We’re moving from an era in which the PC was the computer to one where ‘the network is the computer’, to use Scott McNealy’s celebrated phrase. We’re increasingly getting our computing services from web services such as Google, Flickr, YouTube, Hotmail, Amazon, Yahoo, iPlayer and so on. Our data – especially our blogs, photographs and movies – are stored on hard drives on remote servers. (Hotmail has just increased the amount of free email storage it offers to five gigabytes per user.) But to provide such services, these companies have to operate colossal ‘server farms’ – giant warehouses filled with tens or even hundreds of thousands of PCs, all consuming electrical energy, generating serious heat and needing air-conditioning on a huge scale.”

2008: Smartphones rule
As knowledge workers increasingly rely on mobile connectivity, the ubiquitous smartphone becomes the dominant device for accessing data and applications. We have effectively embraced the new world, where the bulk of the computing is done on the network, and we just need to connect and see the results.

2009: Data centers disappear
Say goodbye to the traditional air-conditioned, glass-walled, access-controlled bunker of computer hardware, all designated ‘mission critical’ by the corporate execs. Now we just get the network cloud to provide us with the computing power, connectivity and storage space we need, when we need it.

For NASA, banks and governments, security and control outweigh cost and convenience, and their massive infrastructures continue to weigh heavily on organizational budgets.

At the average, agile business in this new boundary-less world, the question is being asked: “Do we really need a CIO?”