Is on-demand in demand?

In a relatively short time, computers have evolved from massive machines that took up whole rooms and weeks of setup time for the elite few who could afford or access them to small boxes that millions can easily purchase and set up. And now, vendors want to make this process even simpler. They want to offer users computing power with the simple flick of a switch. They say computing should be as easy as turning on a tap or the flipping on a light.The vision sounds compelling enough. Who doesn’t like the convenience of electricity? Who wouldn’t want that same ease-of-access model applied to computing? The users.
There has been little demand for on-demand computing. Despite the hype, users are not lining up en masse and the utility computing model is a long way from becoming the norm. At most, the industry can only boast a few early adopters.
According to a recent story that was published in the U.K. publication, The Register, “Sun’s grid: Lights on, no customers,” Sun has yet to publically name a customer for its pay-per-use program. This, says the Register, is an indication that Sun has no customers, since customers who sign onto Sun’s $1 per CPU hour and $1 per gigabyte of storage offering must agree to be named in marketing programs. Computing Canada could not reach Sun for comment at press time.
There are several reasons utility computing isn’t being adopted as quickly as vendors had hoped, says Gordon Haff, a senior analyst with Illuminata in Nashua, N.H.
To begin with, while IT managers like the idea of only paying for the computing services they use today, they also like the idea of predictability in cost. And the two ideas, Haff says, are incompatible. It might be possible to put a cap on the cost, but the final price tag when you’re paying on a per-transaction basis will remain variable.
Security is another concern. “Your data is out there on the ’Net somewhere,” Haff says. Such concerns are heightened by regulatory requirements such as Canada’s PIPEDA and the U.S.’s Sarbanes-Oxley. Under such laws, even if a company is not at fault it can still be held liable if sensitive customer data is exposed.
There’s also some confusion as to what exactly utility computing is, Haff says. “It means a lot of different things to a lot of different people. It’s not one thing.”
For some, utility computing is about getting raw computing power over the wires without having to set up an in-house grid computer. For others, on-demand computing is also about getting software as a service. It’s the ability to access applications such as e-mail by going online and connecting to an outsource provider.
Analysts such as Haff and IDC’s David Tapper see little value in the first model. It’s not a formula for success, says Tapper, the director of IT outsourcing, utility and offshore services in Framingham, Mass.
“It’s a pretty brutal market. You’d have to sell an awful lot of horsepower,” he says. “I think you get to a point where they won’t want to buy the raw horsepower, they’re going to want to buy the application sitting on it.”
But for companies such as Tundra Semiconductor Corp., which designs chips, raw computing power that can be turned on and off as needed is exactly what the doctor ordered.
There are periods in the design process that require lots of computing power, says Randy Mullin, director of engineering for Tundra in Ottawa.
But maintaining an in-house server farm large enough to meet those demand peaks would be a costly prospect. Instead, Tundra’s own systems are designed to handle the type of computing it needs to do most of the time. When it hits the peak periods, it turns to Ottawa-based GridWay Computing Corp. When Tundra knows that it will need extra computing power, it calls GridWay as much in advance as possible so the power will be there when needed. Having a large server farm that sits idle for most of the time would be expensive. Also, the servers would become obsolete and need replacing every couple of years or so, Mullin says. “This now becomes the problem of GridWay.”
Why not outsource the whole farm?
In general, it’s cheaper to have the base in-house, Mullin says. Leasing 100 per cent of the time for the base environment would be expensive he says. “We can let our machines be a little more obsolete with this.”

Software as a service
But offering computing power as a utility is just one side of on-demand computing. The concept seems to be tied up with the idea of delivering software as a service — as does, Haff says. This, he says, is where utility computing starts to get interesting. This model has many advantages, but its difficult for companies that already have existing applications to take advantage of it, he says.
It makes very little sense for most companies to build their own customer relationship management solution or their own e-mail system, he says. “That’s not where the competitive advantage lies.” This, he says, would be like IBM and HP building their own company cars. However, purchasing software as a service isn’t as simple as it sounds, especially for companies that already have sprawling IT departments that have a plethora of different applications, much of them tied in together. New applications bought over the wire have to be tied into existing applications already residing on in-house servers.
New companies starting from scratch could achieve a lot with the purchasing-software-as-a-service model, but most companies don’t have that blank slate.
Haff offers up his own company as an example. “We updated our (Microsoft) Exchange server at our company recently. It’s fair to say, if we had been starting from scratch, we probably would have gone to some outsourcing system.” But because there was already an existing server, “at the end of the day, the simpler thing was to upgrade and replace.” This is true of many enterprises, he says.
“Very few people have the luxury to just blow up their data centre and start from scratch.” If Illuminata were starting up today, however, the way it would set up its systems would be entirely different, he says.
Going with an on-demand model for software also means giving up some customization. This can lead to push back from employees. “Our own organization, if you bring in a packaged application to replace what was customized before, there is a certain, ‘Well, you can’t do this anymore.’ ‘Well, live with it,’” Haff says.
New companies starting today — particularly small businesses — should definitely go the outsourcing route for applications such as e-mail and Web hosting, he says.
“SMBs almost can’t reasonably run all the computing systems they need to run their business in-house. There’s too much complexity. Enterprises are capable of doing it, but there’s an economy of scale to outsourcing as a utility model.”

CRM to go
Some large businesses are already experimenting with the software-as-a-service model. For Sun Life Financial Canada it seemed the perfect solution to a new endeavour. Most of the group insurance provider’s clients purchase multiple services from the firm, such as life, dental and health insurance and retirement services, such as RRSPs. Employers were asking for these services to be consolidated so that they don’t have to interface with Sun Life at several different points. Sun Life also wanted to provide interfaces with its partners, whose offerings include wellness benefits and payroll services. To address these concerns, the company created the total benefits initiative, says Bill McCollam, vice-president of total benefits in Toronto.
To create a CRM solution for the program, the company had to be able to capture information from multiple points and include information on marketing and competitors — but it wanted to do it with a minimal of capital and human resources investment. The company opted for Siebel’s CRM OnDemand offering.
Though at its call centres, it runs an in-house version of Siebel, that route didn’t make sense for the total benefits initiative, says Helga Orviss, manager of integrated process for total benefits. It would have taken Sun Life months, perhaps even a year or two, to get an internal CRM solution running. Such an investment makes sense for Sun Life’s call centre, McCollam says, as it supports millions of calls at the employee level and requires a high-capacity system. At the employer level, however, there aren’t as many calls to deal with. It was much simpler populating the information onto Siebel’s servers than it would have been putting it into an in-house system, Orviss says. Now, users from various departments can access the system and information in real time, giving them an understanding of the whole client they didn’t have prior to Siebel OnDemand.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Story

How the CTO can Maintain Cloud Momentum Across the Enterprise

Embracing cloud is easy for some individuals. But embedding widespread cloud adoption at the enterprise level is...

Related Tech News

Get ITBusiness Delivered

Our experienced team of journalists brings you engaging content targeted to IT professionals and line-of-business executives delivered directly to your inbox.

Featured Tech Jobs