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By Doug Bartholomew  |  Posted 06-01-2004 Print Email

Strategy

Experts agree that the first steps toward utility computing will arrive in the bits and bytes of corporate computing—data-processing power, data storage, connectivity over a network and basic applications. It's less clear, however, whether strategic software applications that support key business processes are likely to be served up over a network any time soon. As AMR's Travis puts it, "Utility computing allows companies to save money on things that are not critical, so their IT staff can spend their time improving the processes that give them real advantage in the business."

Merrill Lynch & Co. Inc., for instance, is looking into the utility model, but not for its core business processes. "Utility computing holds a huge opportunity, but there are a lot of business practice constraints, not technical ones, to actually moving this into the production environment," says Dave Cohen, a vice president with the firm's technology-architecture team in New York. For one thing, it's unlikely that the brokerage house's traders will allow their complex data feeds to be farmed out any time soon. The company's systems are too business-specific—and too strategic—to be offloaded to someone else, Cohen says.

Despite these limitations, many companies are trying out utility computing in one form or another, usually for a particular application such as messaging, Web hosting, PC management, payroll, accounting or call-center management. Saugatuck Technology Inc., a research firm based in Westport, Conn., recently surveyed 310 business executives and found that nearly 20 percent of companies are using some form of pay-as-you-go IT services. Roughly half of those responding thought pay-as-you-go computing would help reduce costs and complexity.

Most of the examples of pay-as-you-go computing at firms participating in the survey were for basic human-resources and accounting applications, but some included ERP, CRM and procurement. "We're now in the early adoption phase, but eventually it will become the norm in enabling, managing and improving business strategies," says Saugatuck Senior Program Director Mike West. Meanwhile, according to the survey, almost 40 percent of company executives expect their firms to adopt some form of pay-as-you-go IT within two years.

Ask Your COO:

  • What business applications would best lend themselves to the on-demand delivery format?

    Ask Your Executive Team:

  • What are the business issues that could constrain utility computing?

    Ask Your CTO:

  • How can our infrastructure benefit from offloading certain IT functions?


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