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Firms tiptoe into utility computing

Potential customers for utility computing are wary of sharing information technology resources and worry about the financial viability of service providers, according to a new report.

Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Ed Frauenheim
3 min read
Potential customers for utility computing are wary of sharing information technology resources and worry about the financial viability of service providers, research firm IDC said Thursday.

In a survey of 34 corporations, IDC found that IBM and Hewlett-Packard were among the top choices for providing utility computing, a budding approach to hardware and software needs that treats information technology as a service much like electricity or water.

But David Tapper, program manager for IDC's services research group, said that corporate customers may become more skeptical of utility computing providers that offer their own technology products--like IBM and HP do--as opposed to solely services companies. "As we move further along in time, it may become more of an issue," he said.

The concept of utility computing has gotten increasing attention in the past year, thanks largely to initiatives from IBM, HP and Sun Microsystems. Sun's N1 plan aims to make servers, storage and network equipment work better together and includes a "virtualization engine." Virtualization lets customers pool together similar equipment such as storage systems or servers.

N1 competes with IBM's management plans--variously called eLiza, autonomic computing, utility computing and on-demand computing--and with HP's Utility Data Center product and adaptive infrastructure initiative.

In IDC's survey, 15 companies expected to receive utility computing services from a "generic" provider--that is, they did not specify a particular company or organization. Tapper said this response reveals that companies are primarily concerned with finding a trustworthy provider, whether that company focuses on hardware, software or services. Nine respondents said they'd expect to get their utility service from IBM, five said Electronic Data Systems and four said HP.

Tapper said IBM and HP have the more robust strategies in utility computing. He said Sun appears to be grappling with whether to focus on services along with technology, and EDS hasn't made a public push in the area, but the company is working with partners such as StorageNetworks and Opsware. IT services companies Computer Sciences and Accenture also are potential entries into the field, he said.

Not a new concept
Utility computing isn't totally new, Tapper said. Before the 1990s, IBM and EDS acted as computer service bureaus, and in the 1990s Web hoster Exodus and application service provider Corio offered related approaches.

Tapper indicated that utility computing spending wouldn't rise significantly until after 2008. Indeed, IDC's survey of companies--whose average annual revenue was about $7 billion--suggests computing is not on the cusp of taking off as a utility like electricity. Queried on utility arrangements, 19 companies said they would not like their computer resources to be located offsite and shared by more than one customer. Almost half were interested in creating what IDC referred to as an "in-house private utility," in which technologies such as virtualization and grid computing were installed on the company's own systems. Ten companies said they were interested in a third party managing their "private utility."

IDC also found that companies are not only cautious about utility computing, they also have high demands. Surveyed companies prefer a one-year contract--far shorter than the more typical outsourcing deals, which can span three, five, seven or 10 years, Tapper said. He said companies seem to fear being "locked" into a particular service provider. What's more, companies expect cost savings from the deals averaging 28 percent. "Customers want massive cost reductions," Tapper said.

At the same time, companies worry about issues including the financial stability of providers, whether costs could escalate, the possibility that their data could be stolen and whether utility computing service is feasible in the first place.