June 17, 2005 4:00 AM PDT
Will computing flow like electricity?
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to send electricity over long distances, obviating the need for a local power plant and the people to run it.
To Carr, today's corporate data centers are the private power generators of old: inefficient, underutilized and too costly in the face of the network model of delivering IT services.
"As the technology matures and central distribution becomes possible, large-scale utility suppliers arise to displace the private providers. Although companies may take years to abandon their proprietary supply operations and all the sunk costs they represent, the savings offered by utilities eventually become too compelling to resist, even for the largest enterprises. Abandoning the old model becomes a competitive necessity," Carr wrote.
If technology and marketing investments are any indicator, many computing companies firmly agree that utility computing will become "too compelling to resist."
Starting in 2002 with the launch of IBM's On-Demand vision of more flexible computing, several vendors have gotten on the utility computing bandwagon. Sun used the name N1 to describe its data-center software, and Hewlett-Packard used the term Adaptive Enterprise.
However, initial efforts by both large and small technology providers--which are still in development--have primarily focused on infrastructure technology, rather than hosted services, to make corporate data centers more efficient.
Yet at the same time, there have been a growing number of Internet-delivered services aimed at corporations.
IBM offers hosted processing power and applications to companies, while Sun earlier this year launched its Sun Grid initiative where customers pay a flat-rate of $1 per hour per CPU, in a fee-for-service structure similar to those used by utility companies. Meanwhile, Salesforce.com and Google, which both deliver services via the Internet, were the two of the most high-profile stock market entrants last year.
Chief electricity officer?
But while utility computing is an enticing idea, holding up the electricity industry as the model for how computing should evolve doesn't sit right with all IT executives.
Peter Lee, CEO of grid software company DataSynapse, said that Carr's conclusion that the combination of virtualization, grid computing and Web services will result in utility computing is "100% spot-on." But he said the electricity industry analogy doesn't hold up entirely.
"We do not think the computing industry will eventually resemble the electricity industry as an exact parallel, because unlike electricity, there are many more variables in terms of computing power that would need to be standardized," Lee said. "Computing will, however, become much more utility-like, both in terms of pricing and in terms of on-demand power."
In his piece, Carr theorizes how the shift to utility computing could reshape the competitive forces in today's computing industry. He argues that leading "utility suppliers" of the future will either be today's large hardware providers, specialized hosting companies such as Digex, Internet outfits such as Google and Amazon, or as-yet-undiscovered start-ups.
Longtime computing industry executive Kim Polese, who is now CEO of open-source start-up SpikeSource, said that Carr's competitive analysis should figure in the effect of open source and offshore development from emerging markets, both of which are causing "huge disruptions."
"This means to me that we can't assume that competition will come from the usual places," Polese said. "The leaders of tomorrow may not even exist today, but they could grow offshore from start-up into sizable companies quickly given the strong demand for their services. The computing utility services may be arbitraged across a network of service providers, of various sizes, with pricing developed via dynamic price discovery."
Microsoft, meanwhile, is well positioned to take advantage of any move to hosted services, said Bob Muglia, senior vice president of Microsoft's Windows Server division.
"I think there will be a split. Companies will outsource things that can be very effectively run for an inexpensive price by others...On the other hand, I do think there will always be areas where people are putting in investment to drive business advantage that will either remain in-sourced or under very tight control of outsourcing--not purely hosted. There's a mixture of all these things," Muglia said. "We'll work well in both environments."
IBM's Ambuj Goyal, the general manager of IBM's Lotus division and former strategy executive in Big Blue's software group, fully buys into the notion of utility computing: He wrote a paper for IBM on the subject 10 years ago and offers hosted services for some Lotus products.
However, as with many discussions about the future, the reality will likely lie somewhere between extreme positions.
"Rather than take a 50,000-foot view...you need to get down to earth and look at individual cases," Goyal said. "A standardized utility model has a role, but what a business should do depends on each particular case."
CNET News.com's Marguerite Reardon contributed to this article.
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