IBM touts on-demand computing

Bold and risky plans from technology vendors aren't the norm these days, but IBM Corp. is trying to buck that trend.

The company last week said it is investing US$10 billion in technology and services aimed at treating corporate resources like utilities - meaning companies pay for only the processing power they use.

Known as on-demand computing, the technology would let companies gain rapid access to resources such as server capacity, storage and bandwidth, so they can respond quickly to shifting customer demands and market opportunities. IBM competitors Sun Microsystems Inc. and Hewlett-Packard Co. also are pursuing such pay-as-you-go computing models.

"You cannot find a business executive in the world that doesn't want an organization or a company or an institution that's fast to change, that has a culture that's responsive to customers," said CEO Sam Palmisano, who addressed a crowd including at least 300 customers at New York's Museum of Natural History. The event marked Palmisano's first major customer address since taking the company's top seat in March and a day after IBM's board voted to make Palmisano its chairman after former CEO Lou Gerstner's retirement, effective Jan. 1.

It's a $10 billion gamble, Palmisano said. "Big bet? Yeah, big bet. Bold bet? No doubt about it, it's a bold bet. Risky bet? I don't think so. It's not a risky bet," he said.

Though Palmisano downplayed its risk factor, on-demand computing represents a marked departure from IBM's proprietary-laced history. Palmisano acknowledged creating a flexible operating environment, based on open-standards and equipped with self-managing capabilities, requiring a different approach to designing and building systems than IBM and others have employed in the past.

For one, on-demand computing requires better utilization of computing resources. Palmisano used statistics about the relatively low average utilization of enterprise servers and storage to champion IBM's grid computing technologies, which can harness surplus processing power.

"You wouldn't be an airline if you had 90% of your fleet on the ground. If you were a hotel, you couldn't operate with 95 percent vacancy rates. But that's what we have," Palmisano said of today's corporate server and storage utilization.

An on-demand infrastructure also encompasses autonomic computing, which describes systems that function like the human body - able to protect, optimize and repair themselves. Autonomic computing is a key focus of IBM, which last week announced it is forming a division dedicated to adding autonomic features throughout its product line.

Analysts say Palmisano's speech demonstrated his vision for Big Blue in the coming years - even if it wasn't too far from the path his predecessor had set.

"Palmisano took a good cut at the vision thing," said analyst Steve Milunovich, first vice president at Merrill Lynch, in his commentary on the event.

Palmisano's talk was essentially an extension of Gerstner's 1995 unveiling of IBM's e-business vision, relying on familiar IBM buzzwords such as standards, solutions and integration, he says. "But that's OK. IBM doesn't need a new strategy in our view," Milunovich says.

Forrester Research says it applauds IBM's commitment "to transform infrastructure pricing to help companies better match IT investment to business returns." But IBM isn't alone in pursuing an on-demand model and will have plenty of competition along the way from Sun's N1 and HP's Adaptive Infrastructure initiatives, says Ted Schadler, group director at Forrester.

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