Utility computing services redux

by Jeffrey Kaplan

May 7, 2007 —

Despite all of its promises, until recently the concept of utility computing has gained only limited acceptance in the marketplace. There have been a variety of reasons for the slow adoption of this new approach to structuring corporate data center environments and desktop resources. But, now the tide appears to be turning and the utility computing services market appears to be primed for significant growth.

The promise of utility computing was most prominently promoted by the writings of Nicholas Carr in the Harvard Business Review, the MIT Sloane Management Review and his own book entitled, "Does IT Matter." Carr's indictment of traditional computing models was summed up best in his commentary in the Spring 2005 issue of the MIT Sloan Management Review, "The End of Corporate Computing" in which he stated:

"...Imagine what future generations will see when they look back at the current time...won't the way corporate computing is practiced today appear fundamentally illogical -- and inherently doomed?"

Since that time, many companies have adopted a variety of blade, grid and other virtualized computing technologies to create more flexible and economical data center operations and desktop resources. But, Carr's vision, and that of other industry pundits, of a world in which organizations could acquire computing power by the MIP has not become a reality.

Despite IBM's early thought-leadership on the topic and Sun Microsystems' aggressively priced Grid Compute Utility, few companies were willing to replace their internal computing resources with third-party computing services. As I reported part of the problem was that these and other vendors were spending too much time promoting their own confusing, proprietary solutions rather than offering a simple set of useful services.

However, the rapid growth Software-as-a-Service (SaaS) is breathing new life into the utility computing concept. I discovered over three years ago that many companies were adopting SaaS as an alternative to traditional, on-premise, legacy applications. In my commentary "Hosted Apps Top On-Demand Services", I wrote about a new generation of net-native software services led by Salesforce.com.

What today's SaaS vendors have discovered is how to package, price, provision and deliver a set of targeted services which provide rapid and effective business solutions to their customers. The result is that THINKstrategies' research has found almost a third of organizations of all sizes are currently using a SaaS solution and another 43% are considering SaaS. But even more importantly, of those organizations which are currently using SaaS, over 80% are satisfied, plan to expand their use of SaaS and would recommend it to others.

The high success rate of SaaS deployments is leading many organizations to look for comparable ways to satisfy their hardware requirements on-demand. This has opened the door to a new set of hardware-as-a-service vendors who are emulating the best practices of the SaaS market and taking advantage of the economics of today's virtualized computing technologies.

The most prominent example of this new generation of utility computing service provider is Amazon with its Elastic Compute Cloud (Amazon EC2). The Amazon EC2 enables users to obtain and configure computing capacity via a web services interface at commodity prices-- $0.10 per instance-hour consumed; $0.18 per GB for the first 10TB/month data downloaded, $0.16 per GB for the next 40TB/month data downloaded, and $0.13 per GB for data downloaded/month over 50TB.

By essentially reselling the computing power of its proven service delivery infrastructure, Amazon's entry into the market has brought renewed interest and credibility to the utility computing concept. Now, other players are entering the market ranging from major hosting companies like Verizon Business to a growing array of relative start-ups.

Like many over-hyped technology ideas, it has taken a while for the utility computing promise to become a reality. But, many organizations which have enjoyed the business benefits of SaaS can now look forward to taking advantage of a comparable set of hardware-as-a-service (HaaS) alternatives to their traditional data centers and desktops.

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