Is Creative Computing Gridlocked?

Delivering new forms of computing to customers has been frequently analyzed
and discussed by high-tech companies looking to more efficiently offer

While some vendors have whipped up technology to help customers obtain more
computing power at the touch of a button or the throw of a switch, none
have reaped great success at selling it.

The major bugbear is that fair pricing for grid, utility or on-demand
computing is fraught with pitfalls. There are a number of reasons for this.

For one, selling this newer type of
computing poses challenges absent in traditional licensing. Traditional
licenses are usually straightforward, with a vendor charging by the seat or
processor for the use of an application.

Newer types of computing are not so cut and dry. Take the case of grid
computing , where many applications or servers are
applied to one task at once. This creates a dilemma in how to charge the

Even in a utility-computing scenario, where a customer pays by the so-called
“drink,” chances are they will be paying by the gallon. More
applications or servers mean more licenses, after all.

This issue has throttled the adoption of grid and utility computing, said
The 451 Group analyst William Fellows.

“Software licensing is going to be offered in a more flexible way, but
customers are extremely unlikely to pay software vendors 10 times their
current license fee just to run the software on 100 nodes for a portion of
the time,” Fellows said in an interview.

“On the other hand, the software vendors need and want
users to buy more stuff,” he continued. “It seems to me they’re going to have to come to an accommodation where, perhaps, a user may pay a premium for running software on a wider number of nodes.”

Some vendors, most notably IBM and Sun Microsystems , are trying to attack this problem, albeit in different ways.

Since 2003, IBM has been preaching about its on-demand strategy, where
customers can tap into computing from various infrastructure points,
including hardware and software servers, at the touch of a button.

The Armonk, N.Y., company has made loose talk about metered billing in some
instances. But IBM has not gone public with a set price list.

Instead, the company has picked its spots, renting computing power in
special instances. Petroleum Geo-Services became the first company to rent
processing power from the computer giant’s supercomputers in 2003. PGS Geophysical uses the IBM service for an advanced seismic imaging project in the Gulf of Mexico.

The offering is part of IBM’s e-business on-demand service, which charges
customers only for the computing power and capacity they use, similar to how
an electric utility charges users for the amount of electricity they

But such deals have been few and far between for IBM, as the company prefers
to keep creative pricing close to its vest. Its official position
is even more vague.

Asked if IBM has plans for more creative pricing for its software or
computing power, IBM spokesperson Alejandra Johnson said, “IBM is
continually evaluating licensing and pricing models as market dynamics
evolve. IBM will provide its customers value-based, competitive software
offerings including flexibility through a variety of licensing options.”

Summit Strategies analyst Joe Clabby said IBM does have actual “price lists”
that describe flexible computing models.

Clabby, who attended the annual IBM analysts meeting last week in Palisades,
N.Y., said IBM Senior Vice President Bill Zeitler talked about capacity
upgrades on demand and asserted Big Blue has set utility pricing for servers
and storage.

According to Clabby, Zeitler told the audience that IBM doesn’t approach the market in the same way that Sun does. While Sun goes out and offers
its list price per gigabyte or per CPU, IBM might receive customer
requests for 500 terabytes of storage.

“IBM says: ‘Do you really want 500 terabytes or do you want 200 terabytes
and the ability to expand to an additional 300 over time?'” Clabby said. “So
that’s where the big disconnect is happening.”

Clabby said customers are going to all the systems vendors to comparison
shop. One place they don’t have to look far for utility pricing is Sun, which has proudly hawked computing for $1 per hour per CPU, as
well as storage grid pricing
of $1 per gigabyte per month.

Aisling MacRunnels, a senior director for utility computing at Sun,
suggested IBM is being cagy about its utility computing contracts, because it
would rather throw its global services staff at computing issues, instead of
flexible computing that would be more cost-effective for the customer.

“It’s just not in their DNA to offer something like what we offer without
throwing their services people at it,” MacRunnels said in an interview. At
the same time, the executive said coming up with a fixed pricing model for
grid or utility computing is not as easy as it seems.

“It really is rocket science,” she said. “This was not easy for Sun to do.”

MacRunnels can say that again. Sun was supposed to switch on its grid
offering this month to power the computers of major banks. But
MacRunnels said this week that Sun had to wait until at least July
because of a lack of CPUs.

Delays aside, 451 Group’s Fellows said Sun doesn’t necessarily have the
solution to the grid dilemma with its new licensing scheme. But it is
encouraging from a competitive standpoint when measured against Big Blue, he

“Sun needs some game changes to outgrid IBM,” Fellows said. “So, they’re
throwing a bunch of things at the wall to see what sticks. Whether it sticks
or not, they’re certainly going to push IBM — that’s for sure.”

Fellows is positive IBM will up the ante fairly soon.

“One of the investments IBM is making in its grid research is looking at how
to adopt more flexible license models in just the same way that it has done
for workflow management on mainframes,” Fellows said. “They’re going to
bring new metrics and mechanisms for metering to both utility, on-demand and
to grid.”

One thing is for sure: IBM is not going to rest on its laurels while Sun
nibbles away mind and market share with utility computing deals and
pay-by-the-hour grid contracts.

But until the major vendors like Sun and IBM convince customers they can
deliver what they promised, the new licensing schemes could be gridlocked.

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