Pay-as-you-go politics

IT must call procurement shots in move to on-demand

New Asset  

IT must call procurement shots in move to on-demand




In early 2003, a new business model for IT was being hyped - on-demand computing. Otherwise known as utility computing, or pay-as-you-go, the technology was hailed as the panacea for all technology ills and a sure-fire route to reducing IT operating and management costs.

As Forrester analyst William Martorelli said, the idea was for companies to move towards "an account control mechanism", whereby they only pay for the technology they use. Clearly this is a highly appealing concept for any canny chief executive or IT director, but is it a reality?

From a management perspective, it is important to realise that an on-demand environment is about more than costs, it is about transforming your company into a flexible, adaptive, open, autonomic responsive business, in which all processes are integrated end-to-end across the company and with key partners, suppliers and customers.

It is about having a business that can respond quickly and effectively to change. However, this cannot happen overnight. There is no single technology that can lead companies into this nirvana; instead, an evolutionary approach is required. So what can and cannot be done?

What the IT department can do

Many companies are moving towards on demand computing in safe steps and analysing their existing and often inflexible cost structures as a starting point. They are looking at ways in which they can replace fixed technology costs with variable ones to cope with changing business demands.

One of the key areas where on-demand computing is achievable is in the server environment, which has long been associated with runaway costs and management headaches.

In many companies, the numbers of servers being installed is escalating but, according to analyst firm Gartner's estimations, the average utilisation rate for Unix servers is less than 20%. This begs the question of why companies are paying for the other 80% of server capacity they have but do not use.

Blade servers can address this issue. Businesses can consolidate their servers onto a blade architecture to improve utilisation rates and move towards an on-demand model.

Some suppliers are also offering blade products that enable companies to only pay for the IT capacity needed. This can enable businesses to reduce operational server costs as it allows them to move away from the traditional procurement pricing model.

Devolved control

So there are areas where on-demand computing is achievable, but can businesses move to a completely on-demand IT environment now?

In short, the answer is no. Enterprises are just starting out on their journey, exploring the options and implementing solutions, including blade technology, as one of the first steps.

On-demand computing is only being provided by a few suppliers, such as IBM, but it is not yet mainstream. Furthermore, companies will have to place the strategy at the heart of their business and take a much longer-term view of their business needs. From the chief executive downwards, firms need to buy into on-demand and ensure IT purchases conform to the strategy.

In many cases, this will mean devolving control of the IT budget from business users to the IT department, who will truly understand utility computing. If IT takes responsibility for all technology purchases, they will be able to build servers and storage farms and allocate IT resources to business units in a capacity charge-back model.

In companies where business users hold the IT purse-strings, the move towards on-demand is hindered, server rates are growing and utilisation rates are low. There needs to be a fundamental shift in an organisations's procurement strategy if on-demand technology is to be fully realised.

Businesses need to keep on-demand in mind when they are investing to ensure they are being presented with new pricing schemes and technologies that match variable business requirements. Enterprises must become more savvy in analysing, negotiating and purchasing IT services and solutions to ensure they are moving along the long road to a totally on-demand model.

Iain Davie is business development manager at technology integrator Morse

Read more on Business applications