IBM ushers in utility computing

With IBM Canada’s E-business on Demand initiative, the Markham, Ont.-based company says customers may now access IT the same way they access electricity or water – as a utility-based service.

“E-business on Demand is a new way for customers to acquire infrastructure, applications and business processes over the network, using an on-demand, pay-as-you-go model,” said IBM global services general manager Rick Horton.

IBM Canada hammered home the utility computing model analogy Tuesday with a briefing at the Power Plant art gallery in downtown Toronto, which was originally an industrial power generator. The utility model relies on mass customization to multiple customers on a shared infrastructure, the company said.

E-Business on Demand is nothing earth-shattering or groundbreaking – the basic concept is “utility-like IT delivery,” said Jim Corgel, IBM e-business hosting services general manager.

IBM currently offers usage-based pricing for service options such as managed hosting, networking services and e-procurement, Corgel said, adding that services are priced a number of ways, including fixed monthly subscriptions based on anticipated peak usage or by number of transactions.

Bryan Murphy, general manager for Canadian Tire Retail (CTR) Online, currently uses E-Business on Demand and noted that the “pay-as-you-go” functionality is immediately appealing, especially considering the retailers’ peak usage is around the Christmas holiday season.

“I don’t want to have to worry about Web hosting,” Murphy said, adding that the utility model allows CTR to focus on its core business activities.

Vito Mabrucco, group vice-president, products and services research for Toronto-based research firm IDC Canada Ltd., noted that the utility computing trend is suited for customers who want faster ROI (return on investment), and “don’t want to be tied up in long term investments.”

The emerging trend is the enterprise that wishes to get away from managing complex IT infrastructure and wants to focus on core business needs, Mabrucco said.

“In the utility model, a company purchases enterprise communications computing as a third-party provision and managed services rather than building and owning it themselves,” Mabrucco said.

Potential barriers to IBM’s initiative are the perceived risks, Mabrucco said, considering that e-sourcing means giving more functionality to a third party.

“If things go wrong, who pays the price? Who assumes the risk and to what degree?” Mabrucco offered.

However, he said services such as the IBM offering are not a “fad”, and should have staying power as companies look to cut costs and leverage e-business.

“It’s like buying telephone service, electricity, or other utilities – simple, cost-effective and in the background,” Mabrucco said.

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