Pay-as-you-go computing on the rise

Even before the number of students applying to Ontario colleges online nearly tripled from 30,000 to 84,000 over the same period last year – during one week in January – Bill McKee was cognizant of his organization’s cyclical use of computing power.

“We traditionally have paid a fixed price over the whole 12 months for the whole infrastructure. For example, (for) bandwidth we had added T1s and infrastructure and were looking at utilization reports. We didn’t have enough of it during one week of the year, and the rest of the time I’ve got too much,” noted McKee, the director of Information Services for the Ontario College Application Service (OCAS), the Guelph, Ont.-based agency that oversees student submissions.

Nearly three times as many students are applying to Ontario colleges online this year, known in the province as the “double-cohort” year – resulting from the elimination of Grade 13. OCAS was already making a move from a paper-based model to an online service model when it chose IBM’s On Demand technology services model to deliver a pay-as-you-go type service, anticipating the stress that would soon be placed on its service, McKee said.

OCAS turned to IBM for a number of solutions, including burstable Internet bandwidth; back-up and restore services; IBM SurfAid Analytics – software that measures Web sites for effectiveness and usability; and Akamai edge computing services that push Web site content and applications as needed.

“The whole utility concept isn’t still all there to where you’d like it to be, but I think it’s a start,” McKee said. The ideal environment would be where “everything from licensing to the CPU and storage space is driven on a utility base.”

IBM and other vendors have yet to offer this type of agreement, but it’s coming, he added.

But according to vendors, it’s not for lack of trying. Along with IBM, several companies, most notably Sun Microsystems Inc. and Hewlett-Packard (HP) Co., are developing an approach to hardware and software that treats information technology as a service much like electricity or hydro. While not new concepts, developments such as IBM’s On Demand, HP’s Utility Data Center product and adaptive infrastructure initiative, and Sun’s collaborative N1 servers and storage initiative are making noise.

The nirvana of the computer industry, noted Gord Sissons, vice-president of Sun Microsystems of Canada Inc. in Markham, Ont., is to deploy IT services more like mature utilities such as hydro. It’s a question of the level of the service being deployed but it’s “certainly a journey that the industry is on,” Sissons said. “Certainly what’s driving it is some economic pressure and provisioning – IT systems is more complex and risky. At one extreme is where the client does it all themselves, and on the other extreme is the pure outsourcing model.”

A similar pay-as-you-go approach has been adopted by insurance firm Canada Life. In an agreement with IBM announced last March, the company’s insurance software applications will be delivered on demand – paid for according to the volume of insurance policies processed.

According to Doron Cohen, Toronto-based senior vice-president and CIO of Canada Life, this is the the first Canadian insurance company to enter into this type of systems-provider agreement. IBM’s newly established Insurance Solutions Centre and Genelco software enable Canada Life to focus on its core business, while IBM manages capacity planning for the application environment, Cohen said.

But the pay-by-the-policy agreement is the medium not the message, Cohen said, adding that it’s less about utility computing and more about a positive business outcome.

“It’s how we attempt to achieve a relationship that’s based on outcome rather than on inputs. If you base it on inputs, it’s an inherent win-lose (situation),” he said.

In the case of Canada Life, according to Mark Langlois, Markham, Ont.-based application outsourcing professional at IBM Canada, it had an existing application which was running at capacity. Major financial institutions such as Canada Life are well-suited for this type of agreement, he added.

The savings are there but the larger picture is the agreement provides a predictable cost of expansion, Cohen said.

“The biggest business benefit is to free our people in-house to improve service to customers.”

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