The new IBM chief made the announcement in a keynote address to several hundred top IBM customers and executives yesterday (30 October).
On-demand computing in the business world will build on the existing drive for integration technology that is designed to extend the enterprise beyond its borders and integrate it with customers, partners and suppliers.
The IBM chief said the drive to on-demand computing "is a $10bn bet. Is it a risky bet?" he added. "I don't think so, because it's tied to our customers' priorities, not to our own."
Palmisano linked together existing initiatives at IBM as the beginning of this drive. He said the acquisition of PwC Consulting, the technology services unit of PricewaterhouseCoopers, will provide consulting and the recent purchase of CrossWorlds Software will deliver products to allow data sharing across platforms.
A key technology will be grid computing to allow computer power to be aggregated between heterogeneous systems across the globe and autonomic computing, or self-healing systems, will ensure that everyone gets sufficiently powerful systems whenever they need them.
Using these technologies together will allow the data centre to be "virtualised", the IBM chief added.
Palmisano claimed IBM had itself saved $6.2bn (£4bn) by adopting integration technologists and claimed savings from on demand technologies will be even bigger.
Palmisano's speech reiterated many of the same themes articulated by Lou Gerstner, who led IBM for a decade before retiring and turning the reins over to Palmisano earlier this year and follows similar views on the future of computing from Hewlett-Packard, with its Utility Data Centre and Sun Microsystems with the N1 initiatives.
Jonathan Eunice, an analyst at research company Illuminata, said: "This is, essentially, the networked computing message as we have known it for five years now. But it is a good time for IBM to remind the world that it has the practical assets to do what the customers want to do."
Gartner analyst Tom Bittman agreed. "It's the right thing for them to focus on. They have the broadest capabilities. They have the deepest pockets. They can make it happen."