Cutting Through the "On Demand" Hype

With ongoing economic uncertainty putting a premium on business agility, technology companies are offering up visions for new computing and business process models. Here's a primer on the new models and their potential implications for the supply and...


William Schaefer, vice president for procurement services with IBM Global Services, argues that just as IBM's internal divisions achieved significant saving by handing control over their supply chains to the ISC group, so, too, could other companies drive both greater savings and responsiveness by turning over responsibility for their procurement functions to a service provider like IBM on an on-demand, pay-as-you-go basis. "The beauty of on demand is that it's the perfect theme for a procurement person," Schaefer says. "It's saying, 'I pay for what I need, just what I need and when I need it.'" That pay-for-what-you-use model distinguishes on demand from a traditional outsourcing arrangement, under which a company might pay a flat fee for a fixed set and quantity of services.

Scott Lundstrom, senior vice president and chief technology officer at AMR Research, points out another way in which on demand is not just "business process outsourcing to IBM" by another name. "When you start to look at what the difference is between on demand and outsourcing, certainly there is an implied ongoing improvement that IBM wants its customers to see," Lundstrom says. "That [improvement] comes in two ways: one is IBM's ability to support quick transformation of business process, and the other is their ability to find ongoing efficiencies in a business process. Those two elements ultimately are going to be pretty important in this market, and they're not really a focus of what we might traditionally think of as outsourcing companies."

Lundstrom and other analysts seem to agree that the range of technology and services encompassed by "e-Business on Demand" distinguishes IBM's vision from those of other IT providers that are proffering their own version of on demand. The analyst community most frequently cites HP, promoting "Adaptive Enterprise," and Sun, with its cryptically named "N1" strategy, as the other major contenders in this market, although both these providers would rely more on external partners to deliver certain software components of their visions, as well as business transformation and process integration services, according to the analysts. Separately, Oracle is going after the market for grid software, and some analysts see Microsoft, Computer Associates and Veritas competing on the software side, and Dell competing on the hardware side, of utility computing. EDS has scored client wins with its utility computing offering, too.

The Adoption Curve

For all the chatter in vendor and analyst circles about the potential for grid computing and utility computing, and for all the advertising muscle that IBM and others have put behind their on demand messages, broad adoption of these models has been modest to date. For example, interest in grid computing has centered primarily among users of scientific, engineering and mathematical applications. Case in point: United Technologies' aircraft engines division Pratt & Whitney is using a grid-enabled solution called LSF from Markham, Ontario-based Platform Computing to accelerate its turnaround time for computer-aided simulations, reducing engineering time and cutting development costs.

By contrast, broader business solutions have yet to be re-written to take advantage of the kinds of bump up in efficiency that grid models promise, and companies have yet to tackle the potential political issues that could arise when one business unit seeks to lower its own costs by tapping into the computing power "owned" by another division within the company. In addition, solution providers and enterprises also will have to tackle the issue of priority: Providers must incorporate the ability to assign precedence to certain users or groups of users when they must compete for computing power across a grid; and enterprises will have to address the same issue on the political level within their organizations. In general, Boston-based IT research firm Summit Strategies, in its October 2003 report "Grid Goes to Market," predicts that it will be another three to five years before grid computing emerges as "a core element of many enterprise IT architectures."

Summit Strategies sees a somewhat shorter timeline for the broader adoption of utility computing models. In its August 2003 report "Under New Management: Five-step Strategy for Enabling Utility Computing Operations," the firm predicts that "enterprise management architectures will be transformed during the next two years as ... management strategies for utility computing take hold." The driver? "The promises of dramatic cost savings and business agility benefits from utility-based architectures are too compelling to ignore," Summit writes. Alternatively, Andy Efstathiou and Jamie Gruener, analysts with Boston-based technology consultancy Yankee Group, writing in their August 2003 report "Utility Computing in Next-Gen IT Architectures," see a "deafening" hype around utility computing over the next year, but real-world products incorporating utility computing arriving in volume only in another 18 to 24 months.

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