IBM throws weight behind utility model

By Jaikumar Vijayan

November 4, 2002 12:00 PM ET

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Computerworld - NEW YORK -- IBM's $10 billion "on-demand" initiative announced by CEO Samuel J. Palmisano here last week echoes efforts by rivals to help companies deploy IT as a utilitylike service that can quickly expand or contract with business needs (see story).
But getting to such a flexible -- and ostensibly more cost-effective -- architecture will take time and require a radically different approach to buying and using computer systems, users and analysts said.
"This is all wonderful to talk about in theory," said David Krauthamer, MIS director at Advanced Fibre Communications Inc., a manufacturer of telecommunications equipment in Petaluma, Calif. But in reality, the task of moving to it is "incredibly complex," Krauthamer added.
Still, the concept is an alluring one.
"Companies are tired of making one-off investments in IT," said Ted Schadler, an analyst at Forrester Research Inc. in Cambridge, Mass. As a result, "there is a shift going on toward a commoditization of the infrastructure," he said. "It's going to help users get more value out of their assets and will transition them from a pay-upfront model to a pay-as-you go model, which characterizes any mature industry."


IBM CEO Samuel J. Palmisano

In a speech outlining his strategic vision for IBM over the next few years, Palmisano said the company will deliver the building blocks for this on-demand architecture. Such an architecture could be hosted by IBM or be deployed by companies internally with IBM's assistance, he said.
IBM has created an organization called On-Demand that's focused on developing capabilities in this area through its own research and development and through acquisitions, Palmisano said. The company is opening four On-Demand design centers around the world to help companies test the concept using IBM Web services, Linux and grid computing technologies, he said.
Driving the effort is growing user angst over the complexity of managing IT networks and the gross underutilization of resources that current approaches have created, Palmisano said. "We are seeing a fundamental shift that is irreversible," he said.
On-demand systems like those proposed by IBM will lead to better utilization of computing resources, reduced complexity and lower ownership costs, said William Siegle, CIO at Ace INA Holdings Inc. in Philadelphia.
And they could help businesses drastically reduce the upfront costs for technology, said Mike Prince, CIO at Burlington Coat Factory Warehouse Corp. in Burlington, N.J. "There's always been an obstacle that you don't begin to see the ROI until the thing's deployed," which could be six or nine months down the road, Prince said.
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