Crisis bodes well for utility computing

As companies reconsider their tech needs, vendors plan to roll out products that will help enterprises generate more returns on their investments.
Written by Swati Prasad, Contributor

The financial meltdown may spell bad news for some companies, but it is opening up new business opportunities for others in the IT space.

Companies such as IBM, Cisco Systems and Sun Microsystems, for instance, are introducing new products to ride on the IT cloud services wave.

Rahul Bindal, vice president of industry systems at IBM India and South Asia, said: "In the present financial environment, both midsize and large enterprises are reconsidering their IT requirements and looking at ways to optimize their IT investments."

Metered services are becoming increasingly common in enterprise IT environments, [and] more cost-effective for the company than maintaining a large infrastructure that exceeds the company's average computing power requirements.
Srivalsan Ponnachat, Sun Microsystems

IBM, one of the largest players in utility computing, plans to roll out products that will help enterprises generate more returns on their investments.

"This will include solutions that help companies use fewer servers or storage products for the same level of performance, saving costly space and lowering power bills," Bindal told ZDNet Asia in an e-mail interview.

Srivalsan Ponnachat, director-services practice, Sun Microsystems India, told ZDNet Asia via e-mail: "In such difficult times, when it's getting increasingly difficult for companies to get loans from banks, leasing options for procuring IT assets are proving to be far more attractive."

Srikant Rao, president and CEO of Affordable Business Solutions (ABS) said: "The financial crisis will probably mean that organizations will start evaluating SaaS (software as a service) as a serious option."

ABS' offerings address multiple industry verticals on a SaaS model. It has been in this space for the last four years, and has about 1,000 subscribers to its services.

In 2007, IDC had estimated the global utility computing spending to be around US$4.6 billion. In a recent press statement, IDC said it expects spending on IT cloud services to reach US$42 billion by 2012. This threefold growth will, in part, be bolstered by the current economic crisis that began in the United States and is spreading around the world, the research firm stated.

"The cloud model offers a much cheaper way for businesses to acquire and use IT--in an economic downturn, the appeal of that cost advantage will be greatly magnified. This advantage is especially important for small and midsize businesses, a sector that will be the key target in any plan for recovery," IDC said in a statement.

Booming market
Ponnachat said: "Metered services are becoming increasingly common in enterprise IT environments." With utility computing, for example, a company can purchase computing resources to match fluctuating needs.

"This approach proves to be more cost-effective for the company than maintaining a large infrastructure that exceeds the company's average computing power requirements," he added.

Kiran Datar, managing director, Cisco WebEx Technology Group said: "With increasing globalization and mobility, as well as escalating competitive forces and corporate productivity requirements, corporations of all sizes have started to rethink how they should operate."

Cisco developed the WebEx Connect platform for multidimensional and cross-organizational collaboration.

"WebEx Connect will enable an ecosystem of ISVs (independent software vendors) to create new, composite applications that can be delivered on-demand via the Web to support collaboration across multiple organizations," Datar told ZDNet Asia in an e-mail interview. The applications will reside on a shared network, leverage common APIs (application programming interfaces), utilize a standard user interface, permit business process integration and allow secure data access.

Others, however, feel the economic slowdown has little potential to trigger growth in this segment.

Nasscom's vice president, Rajdeep Sahrawat, told ZDNet Asia in a phone interview: "While we are very bullish on utility computing, I would not like to connect it to the downturn."

Gartner's India principal research analyst, Diptarup Chakraborti, concurred: "A slowdown is not the time when companies like to try out anything new, such as cloud computing."

"Utility computing will grow irrespective of the slowdown and the drop in tech spending," Chakraborti said, adding that an increasing number of enterprises are going in for cloud computing.

According to Sahrawat, utility computing is an old concept, dating back to the 1970s. And more recently, in 2004, it was revisited in the form of ASPs or application service providers.

"It didn't take off then. But today, there is a lot of buzz around cloud computing, and the good thing is a lot of companies are making money out of this business," Sahrawat said.

Impending 'tsunami' from the East
Ponnachat said utility computing is slowly gaining traction in India, especially with the network service providers.

"We see opportunities with respect to virtual desktop deployments where Sun provides a desktop-type environment on a utility basis to its clients, enabling them to do away with PCs and associated ongoing maintenance costs. We are also seeing demand in the HPC (high performance computing) area," he said.

Bindal said: "We see a growing opportunity to offer utility computing services in India and large financial services companies are going to be among the first to be interested."

In 2007, IBM introduced Blue Cloud, a utility computing initiative designed to help customers run efficient grid-based platforms in enterprise data centers. Rather than lease its own data center infrastructure on a pay-as-you-go model, IBM is now focusing on building cloud computing platforms in customer data centers. The initial offering featured IBM's BladeCenter chassis and Tivoli management software.

Bindal said: "Blue Cloud will help our customers quickly establish a cloud computing environment to test and prototype Web 2.0 applications within their enterprise environment. This approach could help IT managers dramatically reduce the complexities and costs of managing scale-out infrastructures whose demands fluctuate."

According to Sahrawat, the next five years will see the death of licensed software.

"Today, Indian IT companies are putting some money in cloud computing. They are not going the whole hog," said Sahrawat.

But once that happens, the global markets are likely to be flooded with SaaS applications. "This will be the next tsunami from the East, where a host of IT companies from India will flood the market with SaaS applications," Sahrawat said.

According to Rao of ABS, in the next three years, 60 to 70 percent of the software sold globally would be procured on a SaaS model.

Swati Prasad is a freelance IT writer based in India.

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