If the vision of so-called on demand computing seems a little foggy at times, spare a thought for the CIO of Insurance Australia Group, David Issa. As the IT leader of one of Australia's largest and most complex IBM-based IT shops, Issa has just completed one of the most unenviable tasks a CIO could face.

After merging the IT shops of IAG and recently acquisition CGU Insurance, Issa chose to rationalise and upgrade data centre infrastructure, enterprise applications and completely redefine his organization's relationship with strategic partner IBM.

With a climate ripe for change and consolidation and substantial Big Blue heritage, IAG would appear to be to be the perfect candidate for an on demand style refit.

But ask Issa for his thoughts about on demand computing and you get a very different take on what on demand means to the end user. Rather than a utilitarian computing Nirvana where CPUs, servers and applications are harmonised according to when and where they are needed, Issa has a disarmingly focused and pragmatic view of on demand computing.

Rather than go to a vendor to achieve the on-demand vision, do it yourself.

"We've got a different model to [the usual on demand offering], we insource and we run all of our own infrastructure. We very much use IBM's products, but from an on demand perspective and not really looking [to its soutions], we are looking at managing that internally," Issa says.

A heavyweight Z-Series mainframe customer, Issa feels that when it comes to getting the optimum combination of pricing and infrastructure and throughput, what really pays off for his enterprise is knowing where the corporate IT mission is headed (and where it has come from) before signing up for anything.

"My job is to make sure my infrastructure is variable and I have a fundamental belief that I can take it in-house and deliver a better service and variability of my cost base by doing it myself.

"I think I will produce a better on demand model by doing it myself rather than the generic one of giving it to someone to do for me," Issa says. Despite his hands-on approach, Issa says the offerings of the likes IBM and HP potentially have a lot to offer customers with less inclination to get down and dirty in their data centres.

"Other people have a view that the outsourced model is the way to go. I don't think it's wrong or right – it's what is right for me and the business I am running," he unapologetically says.

Other high-end IT managers on the receiving end are less forgiving of vendors, especially when it comes to who winds up owning the rights to proprietary business processes or applications enhancements.

"When I sign up for on demand, and I bring [along applications] where I [currently] own the intellectual property (IP) for the business process - and we improve that with the vendor - who keeps the IP?" asks the CIO of one of large state government agency, demanding anonymity to "keep vendors and management off my back".

While being enthused by the utility infrastructure models on offer from vendors, the CIO warns that complex organizations need to look closely at what needs to be developed in terms of middleware and applications, noting that there will ultimately be life after on demand. As such, organizations need to carefully consider where the rights to any on demand source code may reside.

"The contracts which I have seen so far don't have the intellectual staying with us, that's for sure. You have to really check the fine print and have your eyes open – otherwise you risk a potential lock-in," the government CIO warned.

Similarly, the CTO of the Australian branch of a global investment bank says what he has seen of concrete on demand offers from major infrastructure vendors so far have issues with applications licensing.

Asking for anonymity because of the confidentiality clauses of such documents, the CTO said it was clear software and hardware vendors [with the exception of IBM who offers both] had still not worked out how to charge for software within on demand. Subsequently, many software licences required the maximum number of users to be paid for rather than an aggregate or proportional number.

"On demand computing goes towards utility but this goes against almost all of the current [software] licensing regimes. [For example], on my Z-series mainframe or mid-range servers I can scale up or down with on demand, you pay as you go. But that's not what the software licences say. My [database] stack goes by the processor or by the seat or by named user - so what's the value in doing one without the other? How do I stop the software vendors hammering me with a bill for the peak load? They are just not playing ball," the CTO said.

Those working at the cutting edge of distributed systems technologies - from where concepts such as on demand originate - argue that it is important to view the benefits or pitfalls such technology offer in context.

Andy Bond, chief scientist of the Queensland-based computing (and W3C Australian office) DSTC, reckons while there are certainly efficiencies to be gained from on demand, fundamental rules surrounding business computing still apply.

"For me, on demand represents a realisation that the agility of businesses to respond to threat and opportunity is paramount to success. It is about building preparedness for rapid evolution [of technology and business process] into your organisation. Utility computing is one useful component but is by no means the most obvious. I always ask organizations contemplating the introduction of new technology, what is the cost of getting rid of it? Nothing lasts forever," Bond said.

Additionally, Bond argues current on demand offerings from computing heavyweights such as IBM and HP reflect a genuine effort to smooth out the bumps of quickly evolving business IT needs – rather than any wholesale migration of applications, which are also powering along thanks to Web services.

"I have yet to see an on demand application. HP and IBM offerings are more about management and visualisation technologies. These become strategic when the system is changing in size, scale and use under[neath] you. On demand is a new flavour, not a new lollypop," Bond said.

As such, just how good this fabulous new flavour sits with enterprise-hardened IT managers in the short term may depend on which software vendors bother to come to the party.