IT execs weigh utility computing potential

IT thought leader Nicholas Carr headlined an event in St. Paul, Minn., last week that brought together local IT executives who debated the merits and hitches of utility computing.

Carr kicked things off by introducing his ideas about how corporate computing is destined to evolve. He compared it to the emergence of public utilities a century ago. Manufacturers used to run their own power plants, but got out of the electricity supply business once more affordable, reliable and efficient services became available from public utilities.

In a similar way, Carr expects IT to go from being an asset that companies build and own, to a service that they purchase from utility providers. He acknowledged that the idea of utility computing has been touted for a long time, but has yet to fulfill expectations.

"Skepticism is in many ways justifiable and a smart approach at this early stage," he said. Nonetheless, Carr thinks it's time for IT executives to begin challenging their skepticism.

Underutilization of existing IT assets will help drive the migration to the utility world.

"When you look at any study of IT capacity utilization in companies today, the numbers are astoundingly low," Carr said. Analyst firms put typical server capacity in the 15 percent to 30 percent range, PC usage at about 5 percent and storage capacity at about 25 percent to 50 percent.

"If you can centralize this stuff, you get much higher capacity utilization, much more efficient use of labor and a much more efficient model for distributing software," Carr said.

Another driver will be CIOs' desire to stem the tide of money and resources dedicated to basic IT maintenance, which consumes about 70 percent to 90 percent of typical IT budgets, according to Carr. "The only way to escape that squeeze is to get rid of that infrastructure, get rid of those assets that you're forced to maintain," he said.

One outfit that knows this firsthand is the City of Minneapolis. The city outsourced its network, systems, data center administration, desktops and disaster recovery services to Unisys in 2003 in a move expected to save the city between US$25 million and $30 million over the life of the seven-year contract. Going with an outsourcer has allowed the IT organization to focus less on maintenance and more on business process reengineering and improving business outcomes, said Bill Beck, who is the city's director of business development for computer operations.

However, while the city extensively uses outsourcing, the arrangements are based on fixed capacity and don't yet incorporate the usage-based, variable pricing and delivery models that characterize the utility computing ideal. One area Beck would like to see more flexible options emerge is in application outsourcing.

"There's a gross lack of true application service providers today," he said. It's not hard to find an application service provider that will host an application, but finding one that will host, maintain and dole out access on an on-demand basis is difficult, Beck said.

For example, if there are 250 different PeopleSoft modules in existence, Beck would like to give staff access to any of those modules whenever they need it. If it's a seasonal need, he doesn't want to pay for a license year-round. That's the kind of service the city is looking for now — and has been for a couple of years, Beck said.

Andrew Tessier shared some of the successes Park Nicollet Health Services has had outsourcing certain IT functions, including desktops. Over the last two years the healthcare provider has reduced its cost of ownership on workstations by about 250 percent and reduced help desk response time from a few days to an hour, said Tessier, who is director of technical services at the St. Louis Park, Minn., company.

Park Nicollet is billed on a per-seat basis, but there are incentives for Tessier to improve the technologies supported. In its latest desktop contract, Park Nicollet negotiated fees down by 35 percent after committing to reduce the number of workstation images supported from 18 to two, Tessier said. "It's a lot easier for them to manage, so we share the efficiencies," he said.

But while it works for some applications, outsourcing isn't suited to every system, Tessier said. It depends on the complexity and maturity of the technology. One area Park Nicollet isn't ready to let go of is its electronic records management system, for example.

That's the beauty of utility computing; companies can use service providers for pieces of their infrastructure as it makes sense, without sending everything out at once, Carr said.

More and more it's becoming possible to move to a utility computing model, but it won't happen overnight, Carr said. "What it's going to take is an attitudinal change among the users of IT, that leap of faith that allows you to take what you have invested your own blood, sweat and tears in -- and your company's money -- to build and say, 'OK, the time has come to get this from an outside supplier.' That is a tough challenge for many companies and many people."

Managed hosting provider VeriCenter organized the event, and Network World moderated the discussion.

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