September 10, 2003, 9:07 AM — Affiliated Computer Services Inc. (ACS) has struck a deal with Sun Microsystems Inc. that will let ACS pay for Sun hardware and software according to usage instead of paying a fixed price, the companies plan to announce Wednesday.
By paying Sun for usage, ACS, a provider of IT services such as outsourcing and systems integration, will in turn be able to price its services using this same consumption-based model. Sun calls this concept "utility computing," because it resembles the way in which people pay for their water and electricity.
"ACS will be delivering services to its clients on a pay-per-use basis ... and we'll be doing the same thing for ACS," said Bill Mooz, Sun's senior director for utility computing. "We're giving ACS a similar business relationship to the one they'll have with their customers, so we'll only get paid when the equipment gets used by ACS' clients." ACS will target these Sun-supported services to the largest 1,000 companies worldwide.
In addition to letting ACS align its IT costs with its usage, the deal will also make it easier for ACS to access the latest technologies Sun can offer. "The deal will include refresh options for ACS and its clients so they'll be on the latest, most flexible and most efficient equipment available," Mooz said.
Giving clients the option to pay for IT products according to usage is becoming increasingly popular. IBM Corp. and Hewlett-Packard Co. also offer similar options to increase and decrease a client's hardware and software capacity on demand, based on the client's fluctuating needs.
The vendors believe that clients like this payment model because it prevents them from overpaying for an underused IT product. Likewise, it protects them from finding themselves overwhelmed by a sudden computing demand their systems can't handle. These pay-per-use arrangements are also attractive because clients don't have to buy the products and put the capital expenditure on their balance sheets.
This deal is non-exclusive, meaning Dallas-based ACS is free to strike up similar arrangements with other hardware and software vendors, while Sun is free to do the same with other IT services providers. However, the deal is significant for Santa Clara, California-based Sun because it is the first one of its kind it has signed in the U.S. since launching its utility-computing strategy in April, Mooz said.
"This is our first U.S. announcement with a partner on how we're going to team to deliver a complete partner-delivered solution to the customers," he said. "This is the next extension of the model we announced in April."
ACS didn't return repeated calls seeking comment. The companies plan to hold a conference call at noon EDT Wednesday to discuss the partnership.