When we think about how the Internet creates value, we naturally think about its power to connect. That’s how we define a network like the Internet: computer systems linked in a way that makes it easier to share information.

What is less obvious is the power of the Internet to create value by decoupling different types of systems, business processes and companies, enabling organizations to use their resources most effectively. The Internet allows IT infrastructure to be decoupled from front-end applications so that systems can be agile and responsive at the applications level, yet be robust and scalable at the infrastructure level. At the business process level, the Internet allows back-office operations to be decoupled from front-end activities so that companies can share common services while moving customer-facing activities closer to customers. And by decoupling different stages of the industry value chain, the Internet allows companies to focus on what they do best while outsourcing the rest to a network of partners.

Yes, the Internet connects. But it also separates. By understanding the power of decoupling, you can find dramatic new possibilities for creating value.

Break Free of Compromises

To understand how decoupling reduces the need for compromises when designing IT systems, consider the difference between desktop computing and network-centric computing. On the desktop, all functions are colocated?with storage, processing, display and applications all in one place. This colocation involves a hidden compromise. You want your computer to be small, flexible and adaptable?in a word, personal. However, you want it to be powerful, have lots of memory and be highly reliable?more like a mainframe. You get something that’s neither as powerful as a mainframe nor as customized as an information appliance that does only one thing.

If we introduce a network such as the Internet into the picture, the value of IT changes dramatically. Now you can move the mainframe-like functions of the computer to a central server that is powerful, reliable and scalable, while allowing the PC-like functions?such as displaying information on a monitor and taking user input through a keyboard and mouse?to stay close to the user. By separating the back-end infrastructure functions that best belong on a large server from the front-end functions that best belong on the client device, the Internet breaks the design compromise inherent in colocation.

In fact, infrastructure-like functions can be delivered over a pipe?just like water, electricity and natural gas. This is the essence of the "utility computing" idea that IBM and other vendors are so excited about. A paradox of the utility computing paradigm is that infrastructure will become more centralized, while devices and user applications will become more decentralized. I foresee the emergence of a few information utility companies that will supply IT infrastructure, and the creation of billions of highly focused information appliances for end users.