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Opinion: 'Utility' model needs better focus

Opinion: 'Utility' model needs better focus

Recently, there has been a great deal of talk about the viability of the 'utility model,' the idea that information, just like water, gas, electricity and phone service, should be provided on demand via some sort of largely transparent conduit

Recently, there has been a great deal of talk about the viability of the "utility model," the idea that information, just like water, gas, electricity and phone service, should be provided on demand via some sort of largely transparent conduit. It's an important concept and already a powerful IT industry trend, but I suspect I'm not the only one perplexed by the odd disconnect between rhetoric and reality. Part of the problem is the word utility itself. Last I checked, most utility companies were still quasi-monopolies known for plodding, if generally reliable, service. Despite recent attempts at deregulation, it would be hard to think of a less innovative and dynamic part of the U.S. economy. It's telling that the broadcast business, which employs a similar automated delivery model, never refers to itself in this way. Neither should the IT industry. Utility has all the wrong connotations.

What we're really talking about is replacing the use of customer-managed hardware and software products with various third-party IT services delivered over a widely shared network, typically the Internet.

But if you accept this definition, then it's clear that many of us moved to the utility approach a long time ago. Certainly, most individuals (as well as many businesses) who have their own Web sites prefer to rely on Web hosting services, where you pay per megabyte of storage, gigabyte of traffic, number of e-mail addresses and other usage-based metrics. There's not much doubt that this style of computing will become increasingly important for an ever-wider range of applications.

And yet IBM Corp., Hewlett-Packard Co., Sun Microsystems Inc. and others that talk about the utility model rarely mention consumer/small business Web usage (probably because they don't do a lot of business in the low end of the Web hosting market). Instead, they typically focus on large corporations, using exotic phrases such as grid computing and data center virtualization. They do this even though they know perfectly well that large organizations will likely be the last segment to move wholeheartedly toward the services model.

This disconnect between the real market and the current supplier marketing focus seems likely to continue. The reality is that the appeal of services-based computing is inversely proportional to the difficulty of the task at hand. This means that complex and frequently changing business processes will be the hardest IT activities to put inside a remote black box. Although such work can always be outsourced, the necessary customization doesn't go away.--Computerworld (US)

More fundamentally, the essence of the utility model is the provision of largely homogeneous services on a societywide basis. Whereas traditional utility-led industries have powerful economies of scale and are therefore often viewed as natural monopolies, the computer business doesn't work this way. Unlike software tools and applications, the scale economies of computing services are quite limited, with very low barriers to entry. This is why the Web hosting and Internet service provider businesses remain so fragmented.

Consequently, while some services consolidation will no doubt occur, we'll probably never see a few companies dominate the online computing business. In the end, this is why the word utility is so misleading. The big hardware suppliers might want you to think that only they can provide the powerful services infrastructure the IT industry needs, but the market is already proving otherwise.

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