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...


One possible barrier to broad adoption of utility computing could be enterprise's reluctance to give over control of critical data or processes to external service providers. However, solution providers like IBM (with customers like Deutsche Bank) and EDS (with customers like Coors Brewing) already have been addressing these issues in their utility-based IT outsourcing deals. And the success of such Web-hosted solutions as salesforce.com (for customer relationship management) and Arena Solutions (for product lifecycle management) seems to indicate that enterprises are increasingly comfortable with outside services handling their data and processes.

As for the on demand models that IBM, HP and Sun are promoting, AMR's Lundstrom sees building awareness but slow adoption at this point. "While the vision seems pretty sound, there's a lot of maturity that has to happen," the analyst says. Specifically, he believes that commercial application vendors will have to move further along in their adoption of Web services and UDDI, the Universal Description, Discovery and Integration standard for identifying goods and services online. Not that early adopters aren't already moving toward on demand. Schaefer notes, for example, that IBM has had a long-standing on-demand relationship with United Technologies for procurement services. In general, Lundstrom views the on-demand offerings that are available now as being geared toward the higher end of the market. Large enterprises may consider this type of model, for instance, in order to leverage the global resources of a provider such as IBM to manage very large, very complex projects across geographies, or to facilitate a significant ongoing change within a business process, such as during a merger or acquisition.

In addition, Forrester's Radjou sees potential application of an on-demand model for addressing major, immediate technological challenges, such as Wal-Mart's requirement that its top suppliers adopt radio frequency identification (RFID) over the next year. By handing over the technical aspects of RFID to an outside service provider, a company would be able to ensure compliance with a minimal investment while also allowing the company's supply chain leaders to focus on more strategic aspects of RFID, such as how they could leverage the new visibility that RFID will provide into their goods in motion.

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