IT chiefs need to assess costs before taking a utility computing strategy to the board

Suppliers are struggling to demonstrate the benefits of utility computing, whereby firms are charged only for the IT resources...

Suppliers are struggling to demonstrate the benefits of utility computing, whereby firms are charged only for the IT resources used, so how can IT directors build a business case?

The term utility computing refers to shared IT resources, charged on a usage basis. Utility computing is not a technology, and this is partly why IT suppliers are struggling to explain it to their customers. Utility computing is the IT industry's response to a set of user demands: to reduce the cost and risk associated with technologies that do not give a competitive advantage, such as desktop PCs.

IT service companies have yet to figure out how to explain why organisations should use utility computing. In fact, they still have to work out why clients should pay for it. Is it about improving business processes or heightening enterprise agility? At this stage it is neither - utility computing is about reducing costs via the more efficient management of IT systems. IT directors should not lose sight of this.

Suppliers are now offering products and services to support dynamic provisioning of systems - a form of buying IT where customers only pay for what they use.

In the vanguard of suppliers, we can find IBM, EDS, Hewlett-Packard, Sun, Unisys, Computer Associates and smaller specialists such as Opsware. Metering capabilities are available to make usage-based pricing easier on Unix and Linux systems over IP networks.

However, the industry does not yet have a standard way for monitoring exactly what IT resources their customers use. The main contenders are Data Centre Mark-up Language, currently promoted by EDS, Opsware and Computer Associates. Universal Management Infrastructure is developed and championed by IBM.

To clarify the business proposition for utility computing, IT directors need to be confident that its introduction will reduce existing IT running costs by more than 40% within three to five years.

The risk is that any costs organisations can save through utility computing will be recouped by IT suppliers through service fees for IT consultancy, system development and management costs.

Bearing this in mind, IT directors can take two routes. They can continue to own and manage the IT infrastructure of their organisation, or they can pass the risk to the outsourcing companies engaged in building the utility computing market which will promise explicit cost reductions.

In order to develop a utility computing strategy, IT directors should carry out an internal IT audit to identify the cost saving potential of system consolidation or standardisation.

These findings should then be presented to the board for approval of a utility computing strategy. IT directors should then develop a plan with business units to decide how to operate charge-back models for IT usage.

IT directors need to assess the readiness of the infrastructure for utility computing and the financial implications of moving to a utility computing model

Katy Ring is practice leader at Ovum Outsourcing

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