The sad truth, however, is that you've been caught flat-footed. You have to cook up a strategy and business plan; develop and test applications; and deploy servers, storage and network capacity--overnight. In the weeks or months it will take to do that, your impatient customers can have long since defected.
You're toast, right? Not necessarily. You pick up the phone, dial your favorite IT service provider and say, "I need e-commerce applications and the servers, storage and bandwidth to accommodate 5,000 online customer transactions a day, and I need them deployed by Friday. Have a menu of service options and prices on my desk by tomorrow." By early the following week, you're ready to rock 'n' roll.
If vendors such as IBM, Sun Microsystems, Hewlett-Packard, Compaq Computer and Accenture have their way, this is how enterprises will procure and pay for the IT infrastructure to support e-business initiatives in the near future. In the last few months, each of these large IT hardware and service providers has begun to lay out plans for offering pay-as-you-go IT utilities. Though the details vary, the essential idea is that vendors such as IBM, or Sun will deploy ready-to-use computing capacity--either at a customer's site or in shared data centres. Customers can then tap into that capacity quickly and easily, much like users of electric power who buy more by simply flicking a switch.
On the surface, experts say, the idea seems well-suited to e-business, where new business plans need to be executed quickly and where IT resource needs aren't easily predictable. But don't expect the idea to become a reality overnight. Even deep-pocketed vendors such as IBM--which since last December has been pouring billions into the idea--admit that it's going to take years, not months, to develop and refine the new technologies and business models that the IT utility concept will require. Such technologies will include, for example, those needed to monitor and tune the performance of a shared utility to meet specific customers' performance needs and to automate usage-based pricing.
In the meantime, it may take vendors at least that long to sell the idea to enterprise IT executives, many of whom are skeptical of turning over control of big chunks of the e-business infrastructure to service providers, particularly if it means relying on shared servers and storage networks. "We're executing the same thing as IBM's initiative, but we're doing e-sourcing ourselves--internally," said George Surdu, director of e-infrastructure and network services at Ford. "We're determined to maintain our key intellectual capital in this area. We're not interested in outsourcing it to anyone."
Learning to share
IBM's version of the it utility concept--which it calls e-sourcing--is certainly among the most comprehensive and ambitious. CEO Lou Gerstner introduced the initiative in December, promising that IBM will spend $4 billion to build 50 new data centres and the new technologies needed to give the company's e-business customers IT capacity on demand. Since then, the cost of the initiative has increased, IBM officials said--although they won't say by how much--as the task of making e-sourcing real raises new requirements. IBM, for example, is making a major push to find and train legions of integration experts who will be needed to make sure the hosted e-business systems that customers sign up for under e-sourcing work well with existing legacy systems.
"Investment in and commitment to the idea is definitely accelerating," said Ginni Rometty, general manager for strategy and marketing at IBM Global Services, and strategy leader of the e-sourcing initiative.
The capacity-on-demand IT utility idea being promoted by IBM and other vendors is significantly different from traditional outsourcing and Web hosting. In the new model, enterprise customers will be able to quickly and easily increase or decrease their use of IT resources. And, at least in the version being promoted by IBM, they will not have specific, identifiable servers and storage devices dedicated to their applications. Instead, they will share resources with other e-businesses using the same utility. The vendor will track usage and billing as well as guarantee data and application-level security. Service providers such as IBM said that sharing servers and other IT resources in this way--and driving high levels of use--will allow them to reduce costs and offer lower prices that even small and midsize e-businesses will be able to afford.
So far, the test case for this concept from IBM has been its Managed Storage Services offering announced last September. Customers pay a flat, entry-level rate of US$30 per GB per month for access to shared, managed network storage. Rates go up for add-ons such as guaranteed high levels of availability. IBM officials said e-business customers can save between 30 percent and 40 percent on the total cost of storage by turning management and provisioning duties over to the vendor.
And, indeed, some organisations already are doing just that. ChartOne, an 18-year-old provider of medical records management services, for example, is using IBM's Managed Storage Services offering to launch an online version of its traditional product line. Historically, the company has provided hospitals and clinics with on-site records storage and management services. The company has installed systems and software at its customers' facilities--about 1,000 altogether--where it digitises documents, stores them and retrieves them as required by customers. That model, however, is becoming more complex and expensive for customers as privacy regulations such as the Health Insurance Portability and Accountability Act require them to keep better track of who accesses records, when and why. So ChartOne is beginning to offer customers lower-cost remote, networked services using IBM's storage utility to store and manage the information.
Don't ChartOne's customers worry about potential security and availability problems associated with sharing storage platforms with other enterprises--possibly even competitors? Not really, said Peter Henderson, senior vice president of marketing and strategic planning at ChartOne. "We're able to explain to them that it's a combination of our people and IBM making the information available 24-by-7 with redundant backup and security," Henderson said. "The fact that it's IBM provides a lot of credibility."
Without access to IBM's storage utility, Henderson said, ChartOne would not have been able to afford to launch the networked service, which the company calls Vchart.
But, for some vendors, the vision of IT utility goes well beyond just providing shared core infrastructure such as storage on demand and on a pay-as-you-go basis. IBM and services provider competitors such as Computer Sciences Corp., for example, are also using the shared-utility concept to offer hosted applications that can be accessed by e-businesses in the same on-demand, pay-as-you-go fashion.
IBM, for example, has begun rolling out its own hosted, horizontal applications using the utility infrastructure. Last month, IBM announced the Virtual Help Desk, a hosted first-level IT help desk service that enterprises can purchase on a per-user basis. IBM said the service will be available next month. That announcement followed similar deals to host materials procurement application services using Ariba's business-to-business software and remote system and network management application services using software from NetSolve.
Fundamentally, IT service providers say, on-demand, pay-as-you-go e-business infrastructure and applications will give large enterprises and small to midsize businesses the flexibility to launch Web-based businesses quickly and affordably. "It's a license for those people to experiment affordably with what they can do on the Web," said Jim Corgel, general manager for e-business hosting at IBM.
