Sun-ACS deal paves path for more outsourcers to use utility computing

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Sun this month became the third hardware vendor to strike a major utility computing contract with a large outsourcing provider. The deal calls for Sun to provide hardware and software to IT outsourcing service provider Affiliated Computer Services (ACS) on a usage-based structure, instead of a fixed-price model.

The contract will enable ACS to offer utility computing services to its outsourcing clients, so that ACS customers can “pay as they go” for hardware and software, rather than paying ACS to buy or lease the systems they use. ACS will pay Sun only for the hardware and software its clients use during a given time period, according to a Sun executive.

By signing the deal with ACS, Sun enters a growing field of major hardware vendors that have joined the utility computing race. IBM and HP already have announced major contracts priced on a utility computing basis, and both companies already have begun offering those services to major outsourcing providers.

For outsourcing service providers, utility computing makes a great deal of sense. It enables the providers to cut costs, since they can pay for only the hardware and software they need, rather than over-provisioning each customer to provide for every contingency. It helps to guarantee capacity and performance, since the hardware and software come from a large pool of resources made available by Sun or other major vendors with huge server resources. And it helps guarantee that the provider will have access to the latest capabilities offered by the hardware vendor, since that pool of capacity is constantly updated with the next generation of technology.

Over the long term, utility computing could also help cut costs and increase reliability in outsourced IT services. Hardware vendors such as IBM, HP and Sun will likely compete keenly for the rights to provide services to the largest outsourcing providers, which means that hardware and software costs could fall even further, both for the provider and its clients. Similarly, outsourcing providers will be free to sign up for utility computing services with multiple hardware vendors, helping to guarantee back-up services and redundancy just as enterprises do today by contracting with multiple voice and data network services providers.

There are some drawbacks to purchasing services from an outsourcing provider that uses a utility computing infrastructure. First, performance monitoring and trouble diagnostics may be more difficult to do, because the outsourcing provider will no longer own all of the server resources it uses. Just as a network problem may be difficult to trace as it occurs inside a carrier’s network (or across carrier networks), server computing problems may be difficult to trace across a utility computing environment (or across multiple utility computing environments).

Second, the utility computing model is less open to customization than the traditional outsourced IT services environment. Today’s outsourcing providers often tune their servers and operating systems to fit the particular needs of a specific client, but that will be much more difficult to do when the hardware and operating systems are delivered by a third-party hardware vendor. The good news is that there may be less need for tuning, because the hardware vendors’ environments will be large enough to deliver high capacity and performance even under heavy traffic volume.

Finally, there is the question of which customers will be able to use utility computing services. ACS intends to target its initial services to the largest 1,000 companies in the world, which means that it will be some time before small companies can take advantage of the utility computing model. Over time, it is likely that some outsourcing providers will develop utility computing-based services for smaller companies – which would benefit greatly from the pay-as-you-go model – but those services probably will not be available for some time.

Sun’s move into utility computing is a positive step for outsourcing providers and for the industry as a whole. If it can avoid the pitfalls, Sun should find a number of outsourcing companies ready to make the same plunge that ACS did.