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Utility and On-Demand Computing – Where Has all the Hype Gone?

  Industry Statistics published in DM Direct Special Report
November 2, 2004 Issue
  By DMReview.com Web Editorial Staff

This is an Analyst View published on September 28, 2004.

If you go back to early 2003, utility/on-demand computing was one of the hottest topics of discussion by analyst firms. Summit Strategies predicted that utility computing was on track to be the '"next big thing" for IT vendors and services companies that sell to large enterprises. IBM announced that it was spending $10 billion on its on-demand computing initiatives, HP announced its Utility Data Center architecture and Sun had its own N1 data center (now called Sun One) virtualization plans. Back then, the451 commented that "Sun, HP and IBM are duking it out over how best to meet utility computing requirements and command a leadership position. "Gartner Dataquest also claimed then that the advent of "utility" as a business model would "fundamentally challenge the established role of channels for suppliers of all types.'"

Since then, the hype and the corresponding analyst coverage have waned. This is a fairly common occurrence in the IT industry - new concepts or technologies come along, everyone gets excited and outrageous predictions are made. Then reality sets in and companies go about their business - and hopefully some percentage of them begin implementing the next big thing. What is the reality of utility/on-demand computing? Was it a flash-in-the-pan or is there still some substance to it? Let's take a look at what some of the analysts are saying now.

According to a recent release by IDC, "IT capacity will increasingly be delivered as an outsourced utility service over the next decade." Along with this view, IDC explores the notion that "many 'on-demand' services, especially those that can be delivered effectively over networks, will be provided not by established outsourcing or supplier firms, but by a new breed of provider like Amazon, eBay, Google and Yahoo! that have been built from the ground up to take advantage of the power and scale of the Internet." (This is remarkably in line with Gartner's 2003 predictions of potential channel disruption.)

David Tapper, director of IT Outsourcing, Utility and Offshore Services for IDC goes on to say, "The combination of newer players and the disruptive nature of utility computing could radically alter not only the landscape of current players known for provisioning IT, and even communications, services, but also the ecosystem of players and the fundamental process of provisioning such services. Success will depend on how well the players transform their businesses in such areas as accessing new sets of customers likely to buy these services, ensuring that ecosystem partnerships support 'cannibalization' of older services and technologies, and aligning brand with appropriate value chain position."

Yankee Group recently published a report Analyzing Utility Computing's Total Cost of Ownership. The press release accompanying the report stated, "Utility Computing will only deliver real IT cost savings with better pricing schemes that match variable business requirements ... Enterprises must become more savvy in analyzing, negotiating and purchasing utility IT services." Andrew Efstathiou, Yankee Group Business and IT Services program manager goes on to say, '"Utility computing promises to reduce the IT costs associated with time and consumption commitments. These commitments will be tied directly to business need. To achieve that vision, the management layer of utility computing must be developed further and enterprises must become more sophisticated in their approach to analyzing, negotiating and purchasing utility IT services to drive business value creation."

Summit Strategies, which made the 2003 prediction that utility computing would be the next big thing, has made the utility computing/on-demand market one of its key areas of research and analysis since then. Tom Kucharvy, president of Summit Strategies, has published a number of informative reports on this market. In one of his latest pieces, IBM's Virtualization Engine: A Solid Foundation for an On-Demand World, he comments on the progress that IBM has made since its announcement of the $10 billion investment in On-Demand. Kucharvy provides a number of insights into IBM's April 2004 announcement of its Virtualization Engine (VE). With the announcement of VE, he claims, "IBM has taken a huge step toward providing a single, standard virtualization foundation on which it will build all on-demand architectures."

He goes on to state that IBM has three primary goals for its Virtualization Engine:

  1. To establish a common base of virtualization capabilities for IBM's eServer and storage platforms that will serve as a competitive differentiator by providing value in and of themselves;
  2. To provide a baseline environment to which third-party partners can develop workflows that will allow their tools and applications (think, for example, Oracle or SAP) to work better with IBM servers and storage systems, than with competitive platforms; and
  3. To link seamlessly into Tivoli (and especially Orchestrator) in a way that will allow Tivoli to deliver greater value to customers than will competitive management environments.

Unfortunately, we can't cover all his other insights into VE, but we invite our subscribers to read all of Summit Strategies free Utility Computing/On Demand articles on Analyst Views (Analyst Views has a special relationship with Summit Strategies which allows us to republish some of its client-level content for free to our subscribers).

What's the verdict on utility/on-demand computing? We think it's safe to say the hype was way too early, and most analysts seemed to underestimate the scope of the solutions and the amount of foundation and integration work that would need to be done. Even with IBM's VE solution and infrastructure products from other leading vendors, Summit Strategies and other analyst firms are all talking about years before there are truly robust solutions available.


For more information on related topics visit the following related portals...
High Availability/Disaster Recovery.

This piece has been brought to you by the DMReview.com Web Editorial staff.

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