The Skeptics

Not all users are ready to gamble on on-demand computing. Here's a look at the top reasons IT managers are reluctant to pursue this new model.

Despite the vendor buzz surrounding on-demand computing, many IT managers have been left scratching their heads, wondering exactly how this model might benefit their businesses.

"[Users] like the concept," says Corey Ferengul, an analyst at Meta Group Inc. "However, it's so big, so hard to grasp that it seems unattainable and comes across as marketing. All the right words are there; now the users require translation to action."

In fact, a recent Computerworld online survey of 765 IT professionals shows that 50% are somewhat skeptical and 14% are very skeptical about the future of on-demand computing models. Their top concerns? The most-often cited was cost, followed by the fear of getting locked into proprietary vendor systems and, finally, security. Other IT managers say they worry about turning over control to an outside service provider or another business unit in their organization.


Damien Bean, vice president of corporate systems at Hilton Hotels Corp. in Beverly Hills, Calif., points out that with hardware costs so low, users can simply buy their own servers to meet peak demand.

"It's cheaper for me to buy another box rather than worrying about configuration changes," notes Bean. "When I look at the economics of operating big systems, hardware is no longer a great constraint. If hardware is not a large component of the cost structure, is doing all the negotiation and putting everything in a shared physical environment worth it?"

Dee Taylor, IT manager at Trace Die Cast Inc. in Bowling Green, Ky., agrees. "With the price of servers today, you can really afford to have some extra," he says.

But many analysts and vendors argue that cost savings will be realized if companies increase capacity only 20% by pooling servers to crunch computing jobs consecutively. And those savings, proponents say, will come primarily from reduced labor to maintain the systems -- and not necessarily from lower hardware costs.

That argument doesn't ring true for Hugh Honts, network operations manager for the Marion County Board of Commissioners in Ocala, Fla. "Servers are so cheap now, and Microsoft has finally come out with free or inexpensive tools such as [Microsoft Operations Manager]. So why would you do something so complex as grid or on-demand computing?" he asks.

"It wouldn't surprise me that [on-demand] is another way for hardware and software vendors to make money," Honts adds. In fact, several analysts agree that drastically declining costs of processors and servers have forced hardware makers to find other revenue streams, such as management software to handle on-demand computing.

CONCERN: Vendor Lock-in

Some IT managers are more worried that on-demand computing could restrict interoperability and flexibility. "That would be a big concern for us," says Chris Diorio, business intelligence architect at United Parcel Service Inc. in Atlanta. "I'd worry you'd be locked into a single vendor, with everything depending upon them."

For example, Diorio says, Microsoft Corp. has a "history of not making things interoperable, so that nobody else can use the products." He says he's concerned that there could be a similar problem with on-demand providers.

"On-demand solutions so far have been proprietary ... and the lack of interoperability has been a big concern," says Tony Catone, director of systems architecture at Philadelphia Stock Exchange Inc. The exchange is guided by application development, independent of hardware and platforms, which means that it must have a high degree of interoperability, he says. "Interoperability allows our developers to have choice and to be nimble," and a single vendor with an on-demand approach might not respect that, he says.

Catone adds that he uses Hewlett-Packard Co.'s OpenView software but is leery of the vendor's Utility Data Center concept "because it means you are locked into HP products."

Catone says he's glad to see vendors such as Veritas Inc. touting more interoperability for on-demand storage and server capability.

CONCERN: Security

Taylor says security worries would stop him from working with a service provider for a complex on-demand system. "If my data is kept on the provider's machines, then I have no way to know what or how that data is being protected," he says. "Also, I don't like the idea of trusting a provider to stay out of my data."

Sharing compute time with other companies poses a risk of data leakage, Diorio says. "The problem is that there is always a way around security," he says. UPS would probably never use a system that shares resources with other companies, Diorio adds, because of security worries.

For the Philadelphia Stock Exchange, security is paramount, with tens of thousands of trades being processed each second, says Catone. "We would need to understand in great detail the security architecture of any on-demand service provider," he says. "We're conservative, and there's a lot of concern that if you didn't control all the points of ingress to our systems, that it would be too tempting a target for maliciously inclined people to launch nefarious exploits."

Skepticism aside, more than half of the survey respondents said they expect on-demand computing to have an impact on their businesses in the next few years. And 30% have budgeted funds for on-demand technologies or services through 2005.

On-demand computing is a concept some IT managers have held up to the light and turned around a few times. But while the computing model has clearly captured their interest, they're not 100% sold on it. Like others in the IT field, they're taking a slow and cautious approach. In fact, industry experts say that while some users have already deployed applications that take advantage of utility computing for a specific function or business requirement, for most users, the road to on-demand will be an iterative process that will take years, if not up to a decade, to complete.

"I think we'll continue to see pilot projects in the short term over the next several years, with more enthusiasm and deployments building as more of the technologies necessary for utility computing come to market," says Jamie Gruener, an analyst at The Yankee Group in Boston. These developments include integrated data center automation and virtualization tools, easier-to-understand pricing models and improved capabilities to establish and maintain service levels across multiple technology layers within the data center. "It won't happen overnight," Gruener says, "but a number of larger customers have already begun the journey, with midsize customers starting to pilot programs this year and going forward."

Gordon Haff, a senior analyst at Illuminata Inc. in Nashua, N.H., agrees that on-demand will be a gradual migration. "We will reach a point where applications won't have to sit on this particular server with this much memory," he says. "Instead, there will be a pool of applications, and you won't have to worry about which server is actually running it."

Computerworld talked with three CIOs who are examining the on-demand computing model. Here's what they had to say about what they hope it can deliver, what they're concerned about and what it will take to convince them.

Harry Roberts
Senior vice president and CIO, Boscov's Department Store LLC

• Computing environment: In addition to a z900 enterprise server, Boscov's data center houses an RS/6000 running customer resource management, business intelligence and data mining applications. It also has a server farm made up of IBM xSeries PCs. All of these systems are connected to two 3.2TB Shark storage-area networks (SAN) from IBM and support about 700 users. Outside the data center, there are 2,500 desktop PCs (mostly IBM), 3,500 point-of-sale devices and a number of Unix servers running in-store applications.

"We're trying to position ourselves to be more open-source-oriented so that we can move our software to whatever architecture we have spare capacity on," says Roberts. "We're not quite there yet, but we hope to be in a couple of years."

• Hoped-for benefit: The ability to better align computing costs with the monthly revenue stream.

• Biggest concern: A lack of third-party software.

Like most retailers, Reading, Pa.-based Boscov's goes into peak computing mode two months of the year, during the November-to-December holiday shopping season. And like most retailers, the company pays year-round for the hardware and software to support that peak period.

Roberts is intrigued by the idea of on-demand computing, where the company would pay only for the computing resources it uses. "Our software is priced based on the capacity of the hardware we're using it on. So we're paying not just for hardware but for the software, based on our peak capacity," he says.

An on-demand model would not only theoretically reduce Boscov's IT costs, but it would also better align computing costs with each month's revenue.

But while Roberts sees great potential and has spoken frequently with IBM about its on-demand computing architecture, he still sees areas that need to be worked out before on-demand computing is feasible. For instance, there's the question of independent software vendors. "We haven't seen our third-party software vendors step up to the plate and have a complementary program to IBM's," Roberts says.

In addition, a move into IBM's on-demand architecture would require Boscov's to replace its IBM z900 server, since IBM's on-demand plan is focused around its z990. "To justify the necessary investment of retooling our shop, there would have to be some tangible percentage reduction in cost, and I don't know how on-demand is going to achieve that," Roberts says.

• What it will take to convince him: Roberts says he wants proof that on-demand will result in a lower total cost of ownership. "To date, there aren't enough details to make me comfortable that it will achieve my goals," he says.

Roberts also wants to see the third-party software vendors come to the table with licensing models that match on-demand architectures. "Everyone has to be in agreement," he says.

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