Users Just Wanna Have Functionality

Like so many other terms adopted by the IT community, utility computing means different things to different people. The most commonly used definition reduces utility computing to on demand buying of IT infrastructure such as servers, storage, and networks. The big infrastructure vendors, such as IBM, HP, and Sun, are the biggest proponents of the infrastructure on demand view. But most end users of IT don't see it that way. To paraphrase a popular song: "Users just wanna have functionality (on demand)."

While there may be an opportunity for delivering some infrastructure on demand - storage comes to mind - it is certainly not compelling enough to cause a major shift in IT buying patterns. On the other hand if a vendor can deliver on demand functionality then users get excited. The analogy to established utilities such as electricity is apt, but only at the conceptual level. Like electricity, information-based functionality should be available on demand. But, unlike electricity, information requires context.

It is the creating of context that is the difficult part of information technology. Think of all the failed IT projects - very few of them failed due to poor infrastructure decisions. Most projects failed because the buyers did not understand how to create the necessary context and/or they bought an application which did not allow them to create the necessary context. The need to create context does not preclude the utility computing model - as some would argue - it simply makes it more difficult than delivering electricity over copper wires.

A Utility - Yes, a Commodity - No

Nicholas Carr created a firestorm in May with his Harvard Business Review article "IT Doesn't Matter". The article claimed IT has become a utility in the sense that, like electricity and railroads, it is ubiquitous and therefore no longer strategic. He went on to argue that IT is a commodity and should be managed like a commodity. "Would that it were so" is the common refrain to Carr's argument heard in the halls of business. Information technology may be ubiquitous but, unlike electricity, its consumers rarely feel they are getting what they expected - or even need.

But maybe Carr is on to something. If Carr is right about the maturity of the technology - and I believe he is - maybe the problem is not with the technology but with the delivery mechanism. Is it reasonable to expect most companies to have the internal expertise necessary to optimize the value they get from their IT investments? Reasonable or not, the results speak for themselves - most companies fall short. So let me pose another question: Is it reasonable to expect IT to be delivered as a utility - the consumer gets what he/she expects reliably? Yes, if only because the perfect delivery mechanism - the Internet - is itself a ubiquitous commodity.

Utility computing holds the promise to make Carr's statement a reality. Electricity became a commodity when consumers decided it was no longer in their interest to be power generation experts (incidentally, for those unfamiliar with the technology of power generation, it is no trivial task to create and deliver power safely and reliably). Utility computing today is still in its infancy and, therefore, those companies that embrace it early will indeed acquire a strategic advantage over those that continue to insist they can do it better themselves. The multi-million dollar question: Where to start?

Early Utility Computing Success Stories

There are already a number of proven examples of vendors delivering IT functionality on demand to users. One of the most visible and successful is salesforce.com. Unlike the millions of dollars of CRM shelf-ware sitting unused at user sites (according to Gartner only 18% of CRM seats are being used), salesforce.com customers only buy the sales functionality they need when they need it. And if they decide not to use it they simply turn it off and stop paying. The users create context by configuring the applications and populating it with their own data. The need for customer-specific context creates some stickiness to the service but the lack of long-term financial commitment provides the necessary incentive for salesforce.com to provide a high level of service.

Providing a different, but equally compelling, example of utility computing is a small company delivering hosted integration based on the webMethods platform - Interlace. The context is provided by the clients - in this case the business rules for automated interaction with customers and suppliers - but the infrastructure and applications are managed by Interlace. Similar to salesforce.com, Interlace is only successful if its clients are happy because its revenue is dependent on clients running transactions over the Interlace platform.

The business IT world has nothing on the manufacturing IT world when it comes to concerns about data security and access. Yet, with over a hundred companies using its service, Industrial Evolution has proven the utility computing model in the real-time world of production and manufacturing operations. It provides hosted information sharing, applications, and collaboration using OSIsoft's Real-time Performance Management (RtPM) platform and selected third party applications. Although not well known in the traditional IT world, Industrial Evolution has become synonymous with computing on demand in the process operations world.

The three utility computing companies mentioned above are by no means the only success stories but what they share in common is a singular focus on the utility computing opportunity. They are not as visible as IBM and others that have built their sales and marketing campaigns around utility computing. Yet it remains to be seen whether the others, particularly those with their feet firmly planted in the traditional IT world, can deliver what customers really want - IT-based functionality on demand.

Stay tuned next week as we discuss why utility computing will succeed where its predecessors, such as outsourcing and Application Service Providers (ASPs) did not.

Leif Eriksen is founder and principal at Industry Insights, an independent consultancy. He has over 20 years experience in business strategy and technology and can be contacted on <leif@industryinsights.net>.