Data centers adopt on-demand on own terms

With more companies turning to on-demand computing, some decision makers are reevaluating business/IT integration issues. But what does on-demand mean, and who is defining it?

Could you explain on-demand to an audience of your peers? Would you dare?

If not, no need to be embarrassed. The fact is, on-demand and all its related terminology -- utility computing, grid, virtualization -- are nearly impossible to capture in a single definition. However, many data center managers don't really care what this computing concept is called, but rather, they're asking, "What can it do for me?"

According to IBM, on-demand is an IT outsourcing model centered on the supply and demand of computing power. The system is not a specific offering, plan or technology. It's more philosophy than anything else, and encompasses everything from a tailored product design to hosted offerings, including high power computing (HPC) and disaster recovery.

It's a big subject with a small name.

"On-demand is about viewing business and IT together," said Sandy Carter, vice president of on-demand operating environment for IBM.

According to Carter, in a recent IBM survey of CEOs, 93% of the respondents said IT infrastructure was the main inhibitor to business responsiveness.

"Business needs change moment to moment. The premise of on-demand is that IBM's infrastructure can respond fastest to meet those needs," said Charles King, a principal analyst at Hayward, Calif.-based Pund-IT Research.

Part of the business equation driving on-demand is that organizations are taking processes outside of the company. According to Carter, most advanced corporations have achieved a high level of integration with customers, partners and suppliers.

"Companies like FedEx and eBay aren't selling goods, they're selling information," Carter said.

The on-demand mantra is different from most IT vendor messaging in that it's not focused on technology or products. "IBM has done well with on-demand because increasingly at the CIO [chief information officer] or high-level positions, the concerns are business concerns," said Gordon Haff, a senior analyst at Illuminata Inc., Nashua, N.H.

IBM has promoted the concept, championing the model's ability to respond rapidly to fluctuating demand. But critics have complained that the pricing structure and holistic definition of on-demand seem vague. The degree to which users will be able to take advantage of on-demand has yet to play out, specifically because IBM itself is learning what on-demand entails as it goes forward.

The degree to which we will be able to take advantage of on-demand we are yet to find out. But changing the model so I'm moving towards on-demand as opposed to managing infrastructure is a great idea.
Diane Comer
CTOFireman's Fund Insurance

Part of the confusion stems from the model's association with liquid terms like utility or grid computing. On-demand requires more interaction and business integration than a standard utility like electricity. And while part of the technological equation utilizes technologies that allow computers to share computing power between disparate servers to meet demand, no current infrastructure fully synthesizes competing hardware. Moreover, most business apps do not run on HPC grid configurations.

Another challenge to comprehending on-demand is the number of vendors with their own definitions of the model. "When on-demand was announced, in very short order Hewlett-Packard announced Adaptive Enterprise, which looked exactly like on-demand," King said.

Recently, Sun also entered the service industry with Sun Grid. And while Sun is coming late to the game, its pricing strategy may influence the way on-demand is considered.

"Sun believes in a less customized offering than IBM does," Haff said. "Sun Grid might push standardization into the public eye. It may increase demand for uniformity."

Regardless of the way vendors are defining it, each business is defining on-demand according to how it can use it. Case in point: Diane Comer, chief technology officer at Fireman's Fund Insurance Co. (FFIC) , has no problem with the meaning of on-demand. According to Comer, on-demand is defined as a pooling of IT resources.

"This environment allows us to pay for the computing that we need," she said. "In the current structure, we buy servers one by one for each business project. This results in servers that aren't being used to capacity. [Through on-demand], we approach the problem from almost a grid computing approach, where server capacity is utilized across multiple applications and the cost will go down."

Fireman's Fund signed on with IBM in December and as part of the $157 million, seven-year contract, Fireman's Fund will pay for the back-end computing power it uses. IBM said it will save $10 million a year for FFIC. Approximately 500 applications, including policy processing, billing and claims handling, will run on the new IT infrastructure.

Read more on this topic:

On-demand concept still stumps users

Face-off: IBM's on-demand computing

Previous to adopting the on-demand system, Fireman's Fund had signed a 10-year IT outsourcing contract, valued at $380 million, with Montreal-based CGI Group Inc. in October 2001. Merely three years into the agreement, Fireman's Fund and CGI terminated the contract. According to a CGI spokesperson, FFIC had not achieved the savings it was pursuing, and the account was deemed unprofitable.

While IBM may have rescued Fireman's Fund from its IT woes with CGI, analysts warn that on-demand is not a magic pill. "What is required on the customer's side is an understanding of their needs. Fireman's Fund has decided that on-demand provides what they need for where they want to go," King said.

"We are yet to find out the degree to which we will be able to take advantage of on-demand. But changing the model so that I'm moving toward an on-demand environment, as opposed to a managing infrastructure, is a great idea," Comer said.

"On-demand gives us more flexibility because the environment can be more responsive. Today we go through a process that evaluates projects, and funding includes infrastructure costs. That process takes time getting funding, ordering servers and more," she said.

Let us know what you think about the story; e-mail: Matt Stansberry, News Editor

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