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The Hybrid Model

By Edward Cone  |  Posted 01-09-2008 Print

How long will this transition to the utility model take?

Carr: For large companies, it's going to last for five or 10 years at least.

A large company—a GE, for example—has a huge amount of computing scale in supplying its own business. We'll see large companies use the technologies of utility supply—virtualization, multi-tenant systems and so forth—to build in essence in-house utilities that will serve their own business units.

We're seeing that happen with the consolidation wave in data centers and servers. Then they'll pull in utility services from the grid to complement what they're doing internally. That hybrid model is going to last for large companies quite a long time.

What is the impact of this shift on the software business?

Carr: The big suppliers are in a tricky position. All of them are preparing for a future in which more of what they used to sell as packaged components is sold as services over the Internet.

They're all investing in that supply model, but what isn't clear to them yet is whether they can replicate the enormous profits they have received selling software when they begin to sell it as a service. All of them are hedging their bets, they're building out the infrastructure and the code they need to supply products as services, but they are wary of pushing their buyers, particularly their large buyers, to this new model quickly, since the economics of it have yet to be clarified.

In the medium term, you'll see a lot of these companies building out their own data center networks. Over time, as a few, very large companies build out their grids, it will make more sense for software suppliers to get out of the hardware business, to get out of the infrastructure business and supply their services to third-party data center networks.

But it remains to be seen how much consolidation there will be in this business. Inevitably, the IBMs and HPs are going to play a big role here. As of yet, they are taking a fairly low profile in positioning themselves as leaders in the trend.

IBM is kind of a stealth company when it comes to utility computing. IBM runs these huge data centers for hosting, managed services and grid computing. The company is definitely building up its capabilities, and with its Blue Cloud initiative IBM is looking to become in essence a supplier of components and expertise to other companies that are building out these kinds of grids.

Page 3: Potential Barriers


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