VideoAs one example, IBM is now talking to half a dozen retailers about metered hosting of new software (developed by IBM partner DemandTec) that is designed to optimize retail pricing. IBM Global Services now has 35 to 40 software partners developing such industry-focused software, according to Steve Kloeblen, director of finance and operations at IBM Global Services.
But how do those consultants factor in? "Utility service is one part of the on-demand message," says Kloeblen. "Consulting services and business transformation and business-process outsourcing are other aspects." In this vision, utility computing gets the house in order, and consultants step in to help companies "become more interconnected across networks of their own customers, suppliers, and employees."
IBM's message is that the greatest efficiencies from metered pricing accrue to those customers that examine their business processes to identify inefficiencies and standardize platforms, applications, and processes. This is necessary groundwork before resources can be fully shared across an enterprise.
Less clear at present is how these transformation services differ from business-process reengineering. Some customers, mindful of prior wasteful and harrowing business-transformation campaigns, may resist. "If CFOs and CIOs realize there is a similarity between what is being offered now and what was previously called business-process reengineering, that will bring back nightmares of unending projects that were expensive and in many cases of dubious value," warns Eamonn Kennedy, a senior analyst with Ovum in London.
IBM says that business processes are often run on separate hardware and software systems, creating duplicate (or worse) expenditures that can only be reined in by integrating these processes to make efficient use of IT resources.
Meanwhile, in Palo Alto
While it does not (yet) have the broad consulting and vertical industry expertise of IBM, HP does have a longer history of providing metered computing services. HP first introduced its Instant Capacity on Demand (ICOD) offering in 1999. "When a customer buys a machine to meet a need satisfied by, say, four CPUs [central processing units], we ship it with eight," explains van der Zweep. "They don't pay for the extra CPUs until they're turned on." In late 2000, HP refined that approach with its Pay Per Use service, which is based on actual processing throughput versus simply ponying up more money to have additional CPUs activated. HP has already written more than 14,000 sales and lease contracts for ICOD and Pay Per Use, according to van der Zweep.
"IBM has the internal consulting strength and more vertical strength," says Summit practice director John Madden. "HP's message is, 'We can't be in all the verticals. We will rely on partners.'" (Major partners include Accenture and Deloitte Consulting.) HP does have strong vertical market capabilities in telecom and electronics manufacturing, and is developing expertise in financial services and the public sector.
As one example of differentiation, HP was among the founding members of the Enterprise Grid Alliance, announced in April, which pledges to bring grid computing to large companies. While that term is sometimes used interchangeably with utility computing, it's really a subset that focuses on the software needed to link disparate computers into a unified processing engine. Grid computing focuses on the sharing of internal computing resources (see "You Can Always Tell a Harvard CIO...," at the end of this article), and has attracted the interest of Oracle, Sun, Intel, EMC, and others.
Will utility computing shape up as a battle of the data-center heavyweights versus the consulting armies of IBM? It's far too early to tell, but while every company will make its utility pitch based on a combination of savings and improved processes, they may differ substantially as to where they place the lion's share of their efforts. Customers need to know that, and should ask hard questions about both short-term benefits and longer-term vision before signing on. Otherwise, the trend may earn yet another moniker: futility computing.
Norm Alster has worked for Forbes and Business Week and is a contributor to the New York Times.
Leave the Disk-Driving to Us
For 46 years, motorists have relied on the detailed printed maps of the Mobil Travel Guide. But with Web-based travel services among the dot-com survivors, Mobil executives decided to launch a Web service that would complement its printed guide with personalized road maps, hotel listings, and touring suggestions.
In launching the new site, CIO Paul Mercurio had to figure out what sort of a computing infrastructure he wanted. He realized he had one key advantage: "I had the opportunity to start from scratch."
In May 2002, Mercurio sought bids for outsourced management of the new site. The idea, he says, was for Mobil to buy the requisite hardware and software, and have it hosted externally by a service provider. He soon narrowed the field to IBM and an unnamed rival.
At a meeting with IBM, Mercurio was given a final proposal for a traditional outsourced contract. But IBM then told him there was an alternative: Big Blue was launching its Linux Virtual Services, a metered pricing option. Mercurio was told he could be one of the first customers for the service, in which the Mobil site would be run on an IBM zSeries mainframe and share space with other customers, using less than 1 percent of the huge server's processing capacity.
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