Software poised to be a utility, says FutureLink

The utility model works well in many aspects of life. Most of us don’t dig wells or store our own water, we just turn on the tap.

Likewise, gas, electricity, cable and even Internet services flow into our businesses and homes, ready for use when we need them. But is software suited to be a utility?

Cameron Chell definitely thinks so. He’s the president of a young Calgary company called FutureLink Distribution Corp., which is aiming its new so-called Computer Utility Service at businesses with between 10 and 1,000 employees.

FutureLink would like to be the outsourcing provider for all computing services and support for those clients, managing applications at a central server location. The customers would use existing and legacy PCs or thin-client terminals to tie into FutureLink’s servers and would get monthly bills on a per-seat basis, depending on the applications used.

“With thin clients, if there’s a problem at the user end, it’s just a swap-out,” Chell said. “We want to provide a service that’s as reliable as the service in the telephone arena.”

Chell is quick to point to figures from Forrester Research Inc. that say the application services provision industry will reach US$21 billion by the year 2001.

“This is the fifth wave of computing,” he said, at a recent press conference held in Calgary. He outlined the first four waves as: mainframe computers, minicomputers, PCs and network computing.

The company has officially launched its $3 million server farm, which includes clustered NT servers — nine Compaq 3000R dual Pentium 450MHz machines and 23 Compaq 1850 450MHz systems. Supporting these machines are 250GB worth of hard drives, a quad array of 35 70GB tape drives, and 19GB RAM. Citrix Systems Inc.’s middleware allows Windows applications to be run off the server.

This facility will initially be able to support 350 concurrent users, although it’s designed to expand to support 4,200 users across North America. The company said it will build more capacity as it is needed.

The machines are connected by IBM Corp.’s 155Mbps ATM network. The server farm is accessible by LAN/WAN connections, xDSL, frame relay and ISDN, plus 56Kbps modems.

According to Brad Mooney, FutureLink’s technical services manager, the system includes redundancy and RAID 5 protection, and full back-ups are performed nightly. A UPS provides conditioned power and a back-up generator. Environmental controls keep the room cool and humid, to control static electricity, he said. Other noteworthy features include rated two-hour physical fire-resistant walls, noise levels alarms and security card access.

The purported benefits of the Computer Utility Service include central administration and upgrades, extended hardware life, cost savings through volume licensing, and 24-hour help desk support.

Chad Corneal, product solutions manager for financial software vendor Great Plains Software Inc., said FutureLink will be able to achieve “an economies-of-scale type of solution,” which will translate to lower costs for business users.

“This opens up a whole new market, the smaller side of the market where the capital outlay was too big,” said Rick Larson, area manager in Calgary for Onyx Software Corp., a vendor of enterprise relationship management software.

Enerline Restorations Inc., a small Calgary engineering solutions firm, is already using the Computer Utility Service, connecting six terminals to FutureLink’s servers via xDSL technology. The appeal came down to economics, said vice-president and CFO Ron Hozjan.

“It came out to be very economical. Basically, it works out to be a two-year payout. I’d be changing PCs and upgrading software almost every two years anyway.”

Dave Marshall, director of Canadian software research for Toronto-based IDC Canada Ltd., said this application hosting/rental model has “just come onto our radar screen in the last two or three months.”

In many ways, it’s a return to the service bureau efforts of the mainframe days, he said, indicating this should be particularly attractive for small and medium-sized organizations that may not be able to afford the software, or more importantly, the human resources to maintain those applications.

Henry Bilodeau, director of sales for FutureLink, cited the familiar US$9,000-per-year figure held up by research firms such as Gartner Group as the annual cost of operating a PC. A good guideline for FutureLink’s costs, he said, is about $3,000 per year, per seat. As an example, he said a company with its own hardware but accessing a typical configuration including an office productivity suite, an Internet connection and e-mail, could pay about $250 per seat per month. If customers are also in need of hardware, Bilodeau recommends buying or leasing solid-state Windows terminals.

According to Chell, in January 1998, FutureLink had no revenues and six employees. It finished the year with $10 million in sales, and 130 employees (that growth is partly attributable to the August 1998 purchase of Calgary-based outsourcer, SysGold Ltd.)

In other FutureLink news, the company plans to launch an application portal service by Q4. That would be aimed at consumers who could access a variety of applications over the Internet and be billed per usage.

IDC’s Marshall commented: “The idea makes sense; people want access to a wide variety of applications, as long as they keep the costs reasonable.”