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Will computing flow like electricity?

Nick Carr fires back
On Friday, the author responded generally to IT executives' comments and criticisms.

"What we don't know is the ultimate shape of the IT utility model or the course of its development. That's what makes it so interesting -- and so dangerous to current suppliers. What we do know is that the current model of private IT supply, where every company has to build and maintain its own IT power plant, is profoundly inefficient, requiring massively redundant investments in hardware, software and labour. Centralising IT supply provides much more attractive economics, and as the necessary technologies for utility computing continue their rapid advance, the utility model will also advance. Smaller companies that lack economies of scale in their internal IT operations are currently the early adopters of the utility model, as they were for electric utilities...

"There are certainly tough challenges ahead for utility suppliers. Probably the biggest is establishing ironclad security for each individual client's data as hardware and software assets become shared. The security issue will require technological breakthroughs, and I have faith that the IT industry will achieve them, probably pretty quickly."

If technology and marketing investments are any indicator, many computing companies firmly agree that utility computing will become "too compelling to resist".

Starting in 2002 with the launch of IBM's On-Demand vision of more flexible computing, several vendors have jumped on the utility computing bandwagon. Sun used the name N1 to describe its data-centre software, while Hewlett-Packard used the term Adaptive Enterprise.

However, initial efforts by both large and small technology providers -- which are still in development -- have primarily focused on infrastructure technology, rather than hosted services, to make corporate data centres more efficient.

Yet at the same time, there have been a growing number of Internet-delivered services aimed at corporations.

IBM offers hosted processing power and applications to companies, while Sun earlier this year launched its Sun Grid initiative, where customers pay a flat rate of $1 per hour per CPU, in a fee-for-service structure similar to those used by utility companies. Meanwhile, Salesforce.com and Google, which both deliver services via the Internet, were two of the most high-profile stock market entrants last year.

Chief electricity officer?
But while utility computing is an enticing idea, holding up the electricity industry as the model for how computing should evolve doesn't sit right with all IT executives.

Peter Lee, CEO of grid software company DataSynapse, said that Carr's conclusion that the combination of virtualisation, grid computing and Web services will result in utility computing is "100 per cent spot-on". But he said the electricity industry analogy doesn't hold up entirely.

"We do not think the computing industry will eventually resemble the electricity industry as an exact parallel, because unlike electricity, there are many more variables in terms of computing power that would need to be standardised," Lee said. "Computing will, however, become much more utility-like, both in terms of pricing and in terms of on-demand power."

In his piece, Carr theorises how the shift to utility computing could reshape the competitive forces in today's computing industry. He argues that leading "utility suppliers" of the future will either be today's large hardware providers, specialised hosting companies such as Digex, Internet outfits such as Google and Amazon, or as-yet-undiscovered start-ups.

Longtime computing industry executive Kim Polese, who is now CEO of open-source start-up SpikeSource, said that Carr's competitive analysis should figure in the effect of open source and offshore development from emerging markets, both of which are causing "huge disruptions".

"This means to me that we can't assume that competition will come from the usual places," Polese said. "The leaders of tomorrow may not even exist today, but they could grow offshore from start-up into sizable companies quickly given the strong demand for their services. The computing utility services may be arbitraged across a network of service providers, of various sizes, with pricing developed via dynamic price discovery."

Microsoft, meanwhile, is well positioned to take advantage of any move to hosted services, said Bob Muglia, senior vice president of Microsoft's Windows Server division.

"I think there will be a split. Companies will outsource things that can be very effectively run for an inexpensive price by others... On the other hand, I do think there will always be areas where people are putting in investment to drive business advantage that will either remain in-sourced or under very tight control of outsourcing -- not purely hosted. There's a mixture of all these things," Muglia said. "We'll work well in both environments."

IBM's Ambuj Goyal, the general manager of IBM's Lotus division and former strategy executive in the company's software group, fully buys into the notion of utility computing: he wrote a paper for IBM on the subject ten years ago and offers hosted services for some Lotus products.

However, as with many discussions about the future, the reality will likely lie somewhere between extreme positions.

"Rather than take a 50,000-foot view... you need to get down to earth and look at individual cases," Goyal said. "A standardised utility model has a role, but what a business should do depends on each particular case."

CNET News.com's Marguerite Reardon contributed to this article.