IBM On-Demand Computing is Outsourcing, Not Utility Computing

American Express’s $4 billion deal with IBM Global Services in February 2002 was hailed by IBM as an example of utility computing coming of age. But the Amex deal and the other deals IBM has signed since announcing its on-demand strategy last fall are simply outsourcing deals with a slight twist: variable pricing for some of the computing and storage power. Much of Amex’s variable pricing involves IBM simply bringing in extra boxes and hard drives without turning them on or charging Amex for them until the company needs the extra power.

That’s not the same thing as plugging into the wall and having computing as a utility flow down the wire, says David Tapper, senior analyst of networked infrastructure management services for IDC (a sister company to CIO’s publisher). The computing power that IBM provides Amex doesn’t come from an enormous pool shared by many customers—as electricity would be—and a utility wouldn’t be assuming management over old computing systems and 2,000 of Amex’s IT employees. Indeed, it’s hard to imagine Amex or any of IBM’s big, security-conscious outsourcing customers sharing a pool of computing resources for their hundreds or thousands of different apps anytime soon. “There’s a huge amount of trust that needs to be built before this can happen,” says Tapper. “It’s like saying, You’re going to feed and clothe me, right? You’re always going to be there, right?”

Today, utility computing is not a new technology. It’s a pricing scheme, and not necessarily a bad one. Just call it what it is.