Business models for the utility computing industry

Abstract

Utility Computing is being touted as the next big revolution to hit the industry. With organizations constantly looking for newer ways of reducing costs and improving efficiency, one of the obvious targets is the IT department. Organizations have, over the years, made huge investments in software and hardware and have begun to realize that their investments are not giving them the right returns. Over provisioning and abysmally low utilization rates of the infrastructure means that the customer is not getting the right benefits for the scale of investments made in technology and infrastructure. Utility Computing seems to be the answer to such problems. The ability to build resources to fit the load and then dynamically respond to variations in load means that the infrastructure is highly utilized. Further, the ability to pay for as much as the resources are used is a huge benefit to organizations. Utility Computing, which comes with claims of being able to provide such benefits, seems to be a very promising technology and business solution. The concept of Utility Computing has to be backed up with very good business models. These models should encompass several aspects of the concept such as Pricing and Licensing, Infrastructure Deployment, Service Oriented Architectures and Capacity on Demand. The combination of strong technology and sound business models promises to make Utility Computing the next big paradigm in the industry. The most important and as yet under developed aspect of Utility Computing is the aspect of Pricing and Licensing. New P and L models need to evolve that will make it possible for large scale adoption of Utility Computing. These new models will be radically different from the existing ones in that they will link the price a customer pays for a resource to the value derived out of it. Value based pricing and licensing schemes will lead the adoption of Utility Computing. Other important issues that will determine the success or failure of Utility Computing include management and consolidation, security, integration of the various components and appropriate vendor selection.