October 01, 2003, 9:02 AM — Sun Microsystems Inc. and SchlumbergerSema on Wednesday will announce a partnership to give outsourcing clients the chance to pay for the computing resources they use as opposed to having to agree to an upfront fixed price.
Sun is providing server computing resources and storage capacity to Schlumberger under a pay-per-usage model, and Schlumberger is in turn doing the same for its outsourcing clients, the companies plan to announce Wednesday. The Sun servers that SchlumbergerSema will use to provide these pay-per-use outsourcing services are hosted in SchlumbergerSema data centers.
The usage is computed using a formula developed by Sun that takes an average of server CPU utilization and disk storage and divides it into "power units." Sun's goal is to increase the precision and granularity of its measuring capabilities to the point where customers can be billed for individual transactions at the application level. "We're on that road but not yet there," said Ashif Dhanani, director of Sun's utility computing marketing. He estimates it will take Sun about two years to achieve that goal. The collaboration of software vendors will be key in being able to measure usage at the application level, said Stephen Holmes, global marketing manager for data center outsourcing at SchlumbergerSema, in Houston, which is the IT services arm of Schlumberger Ltd.
The vendors aim to target companies in the energy, finance, telecommunications and government sectors. Sun and Schlumberger struck a similar agreement two years ago, but it was less flexible than this one, requiring clients to commit to a minimum volume of processing resources. That minimum volume was four CPUs on a large Unix server. This new agreement lowers the minimum to "a fraction of a CPU" and, unlike the previous deal, accommodates not only surges in demand but also reductions, Dhanani said.
Sun struck a similar partnership several weeks ago with another IT services provider, Affiliated Computer Services Inc. (ACS). On the other hand, Schlumberger doesn't have similar agreements with other hardware providers, but it could strike them up, because this deal with Sun isn't exclusive.
The option to pay according to usage has become very popular. Enterprises say they like the idea of having their IT spending mirror their IT consumption, thus preventing them from overpaying for IT resources that remain underused. Having costs rise and fall based on usage gives clients more control over spending and more flexibility over how they use their IT resources. These outsourcing deals often also free the client from having to purchase the hardware they'll be using, liberating them from the upfront capital expenditure and from management and maintenance costs.