Sun to turn computing power into pork bellies?

Sun and partner plan electronic exchange where companies could buy or sell processing power as if it were a traditional commodity.

SANTA CLARA, Calif.--Sun Microsystems and Archipelago Holdings plan to build an electronic exchange where companies can buy or sell processing power, a step Sun hopes will further its vision that such power will become a true commodity.

Sun believes customers eventually will stop building their own infrastructure and instead buy computing power off a grid from companies specializing in such utility computing services. The new exchange is intended to make that power easier to buy.

"The ultimate statement of using this utility is to be able to trade it," said Robert Youngjohns, Sun's executive vice president of strategic development and Sun finance. The company wanted to make sure customers wanting to tap into that power "could buy it freely in an open-air market."

Sun this week began offering some premium customers access to computing services costing $1 per processor per hour, letting them run programs such as financial simulations on banks of machines using Sun's Solaris operating system and Advanced Micro Devices' Opteron processor. Smaller customers will be able to tap into this Sun Grid later this year, Sun said.

Eventually, Sun wants to see prices set by the market, Youngjohns said. That's where the deal with Archipelago, which supplies electronic exchange technology, comes in. Sun expects the exchange to open by the middle of the year, Youngjohns said.

Sun believes that being able to bid for the computing capacity on an open market will help establish the service as a commodity. Sun initially is the only supplier, but Youngjohns expects to be joined by business partners and eventually companies with their own excess computing horsepower.

With customers able to bid on computing cycles, Sun expects the arrival of the same sort of dynamics that characterize markets for traditional commodities such as crude oil or pork bellies.

"Maybe people will be trading in this commodity. Maybe they'll think it's a good idea to corner the market," Youngjohns said. For example, perhaps Federal Reserve Chairman Alan Greenspan will issue his latest economic views and 500 traders will want to run risk analyses immediately, so commodities traders would bank on an increased demand for the utility computing commodity, he said.

But some characteristics of Sun's unit of computing power--the CPU-hour, or amount of work a processor can do in one hour--are different from typical commodities. Most commodities such as milk, unleaded gas or 24-karat gold are undifferentiated products that are largely identical regardless of supplier.

But Sun's CPU-hour is hardly generic. Some processors are more powerful than others or are housed in more powerful systems. Some computers might be attached to fast networks, making them conveniently available to customers, or they might be located in hard-to-reach corners of the Internet. And Sun's CPU-hour based on Solaris x86 would likely have limited interest for a customer that wants to run Windows or Linux software.

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