Service providers turn on utility tap

An emerging outsourcing model that offers enterprises access to services as they are needed could make running a corporate network as easy as turning on a tap.

The notion of outsourcing as a utility – where services that do not have to be customized are available to IT shops through providers on an as-needed basis – is one that is just beginning to take hold.

“(The utility model) is really an attempt to provide a set of base-level solutions that are more designed to appeal to a mass market,” explained Dan McLean, Toronto-based director of outsourcing and IT utility research at IDC Canada Ltd. “I think it’s fair to say that if you look at outsourcing traditionally, it has really been very customized…But I think, clearly, one of the big trends that is emerging in the industry is this notion of trying to create a more base-level set of services that would, for all intents and purposes, look like the same thing to a lot of customers – that is the whole utility notion.”

One of the most common things for the average enterprise to outsource through this type of model is Web hosting, according to McLean. He said this example is typical of the utility model because for Web hosting, service providers generally offer a common type of infrastructure.

The telcos are the companies which will likely be among the first companies to offer the utility model and be successful with it, McLean noted, simply due to the fact that it is something they have been doing for years with their other services. Other types of companies that are looking to get into the game include traditional outsourcing companies and vendors.

EDS Canada is looking to offer outsourced services through the utility model. According to David Woelfle, the chief architect for the core infrastructure at EDS in Toronto, Web hosting is one of three services the company delivers through the utility model. The other two are distributed systems services and system cycles, “where I can buy mainframe cycles on pretty much a demand basis,” Woelfle said. “There is a base fee per month for an organization to have access to that service, but after that it is very much consumption-driven. You pay for what you use.”

IBM Canada Ltd. announced its E-business On Demand initiative in May, which allows companies to pay for services such as storage as they need it, and on a consumptive basis. This, said Paul Lovell, IBM Canada’s general manager of e-business hosting services, “is really how IBM is addressing the utility – or it is sometimes called e-sourcing or consumptive model, or computing-on-demand or on-tap. There’s lots of words for it, which, if you look at it at its heart, is really delivering standardized applications or processes or infrastructure services, being IT services, as a service, over a network.”

One San Jose, Calif.-based IBM customer that was eager to jump on board noted that the notion of paying as you go, or as you use, only made sense because that was the model the company was offering to its customers. ChartOne offers administrative and management services of medical records to healthcare providers in the U.S., according to Peter Henderson, the company’s senior vice-president, marketing and strategic planning. ChartOne is using IBM’s E-Business on Demand storage services.

“Because they are working with us as a utility, it enables us to in turn work with our clients like a utility,” he said.

McLean noted that enterprises in Canada are showing a growing interest in the outsourcing of particular activities, so the heat is on providers to offer them.

“You’re going to see (the utility model) coming from a lot of different directions,” he said. “The big name companies are the ones that I think are going to promote and propagate the idea, but beyond them, I think you’ll see a lot of smaller players as well. There’s a lot of room in the market for various types and flavours of services.”