Flip a switch, and on come the lights. Turn a spigot, and out comes the water. Click a mouse, and out come the data. That's the idea behind a movement afoot to make computing power as silent, sure and ubiquitous as any other utility.
"Utility computing," as it is known, is not entirely new. It began as "time-sharing" in the 1950s, when large companies bought data-processing cycles on shared mainframes instead of their own hardware. In the 1980s, it evolved into outsourcing, wherein businesses relegated their IT infrastructure -- most often enterprise resource planning (ERP) software suites, such as those from SAP AG, Oracle Corp. and PeopleSoft Inc. -- to a large consulting company. And in the 1990s, it morphed into the practice by which companies relied on service providers that offered outsourced data storage, Web hosting, messaging, help desk functions and security.
Traditional outsourcers and the smaller service providers remain today, but they're not right for everyone. Because traditional outsourcers subsume so much of the client's IT infrastructure -- and, therefore, the costs of the transition and implementation -- they usually demand contracts of at least three to five years.
On the other hand, the application service providers (ASPs), management service providers (MSPs), and storage service providers (SSPs) are less intrusive but, for many companies, their services are too narrow. To make matters worse, because many service providers went
Enter utility computing.
"It takes best ideas of outsourcing and best ideas of service providers and combines them," explained Jeff Kaplan, founder of ThinkStrategies, a Wellesley, Mass., consulting company.
"Rather than signing one long-term strict agreement, you sign a subscription that offers flexibility," he said.
Indeed, utility computing lets you pay as you go. You also pay only for the computing power you use. Under broader outsourcing contracts, you may well be paying for the availability of applications or storage that you'll never need.
Utility computing subscriptions typically run month to month and take any of three forms:
Capacity on demand, where you pay for more computing power as you need it.
Forecasted usage, where you pay ahead of time for estimated usage, measured either by quantity of storage space or number of transactions.
Per actual use, where a meter calculates how much demand you're putting on the service provider's systems.
Utility computing is now being offered by a growing number of midsized service providers. They include: SiteLite Inc., SevenSpace Inc., Totality Corp., SiteRock Corp., InteQ Corp., NOCPulse Inc., Freshwater Software, NaviSite Inc., Opsware Inc. (formerly Loudcloud Inc.), SiteSmith Ltd., Logictier Inc., and Cybergnostic Inc. But traditional outsourcing firms are also utility players. Telephone companies and large systems and software providers -- namely, Hewlett-Packard Co., Veritas Software Corp., Computer Associates International Inc., Microsoft Corp., EDS Corp., Sun Microsystems Inc., BellSouth Corp., and IBM Corp. -- are hoping to reach down into the midtier market. In some cases, these larger players are subcontracting services to the smaller providers.
What type of company should work with a utility computing provider? Any company that wants to outsource some of the heavy lifting, such as maintenance, security and data recovery, while keeping some power in-house -- such as letting its own IT workers change user configurations, for example. Also, companies that would like to outsource but cannot afford the expense of transferring their existing IT infrastructure to outside companies should check out the utility route. While American Airlines and 7-Eleven have been among the marquee names that have become utility computing customers, the biggest growth may well come from midtier companies.
While large enterprises have been the leading buyers of IT outsourcing services in the past, service providers are now focusing on midtier enterprises with annual revenues of $250 million to $1 billion, according to the Boston-based Aberdeen Group. The potential market includes thousands of businesses, analysts have said.
What should you do before you sign on? Get references. The current version of utility computing is fairly new, but there are still companies that have been doing it for years. Seek them out.
Study service-level agreements, not only between you and your service provider, but between your service provider any subcontractors or general contractors with which they're working.
Above all, know the nature of your business. If it's fairly stable, with little seasonal fluctuation, a stable number of employees, and no significant spikes in the number of customers, then it might be best to either keep your IT completely in-house or consider traditional outsourcing.
Kevin Ferguson is a free-lance journalist based in Boston.
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