It pays to sort out UCPs

IBM’s announcement of an impressive round of on-demand computing megadeals at the end of 2002 signals that utility computing services finally might have arrived. Utility computing services promise to give companies a new way to satisfy IT requirements while adhering to growing pressure to reduce costs. But it also puts companies at risk of entrusting their corporate computing operations to utility computing providers, which could cost them more in business disruptions and lost revenue if the UCPs fail to keep their promises.

Utility computing is the latest iteration of a shared computing services model last represented by application service providers (ASP), which held so much promise during the Internet bubble. As everyone knows, few ASPs survived customer apprehension about the risks of the ASP model, especially about being at the mercy of untested and poorly financed service providers. Innumerable ASPs disappeared over the past 24 months. Yet, with the reliability of the Internet improving, and a range of companies less concerned about the threat of outside access and control of proprietary data, utility computing is becoming increasingly attractive.

The prospect of replacing all or part of your day-to-day computing operations with a flexible pay-as-you-go service has strong appeal. What also makes it attractive is the caliber of the leading UCPs. At the high end, Electronic Data Systems and HP  have joined IBM in promoting the virtues of utility computing to large organizations. Below the radar screen are smaller players, mostly regional value-added resellers and IT service companies, offering a variety of desktop and security monitoring and management services to small and midsized organizations.

As industry acceptance grows, expect more UCPs to jump into the market. In doing so, they will only muddy the waters. Before selecting a UCP, be sure to examine five ingredients of its operation:

• The financial structure of the UCP, including its revenue stream, cash flow and working capital to make the infrastructure investments necessary to deliver its services.

• The quality of the UCP’s network infrastructure and its ability to ensure proper connectivity between the UCP and its clients.

• The UCP operating environment’s ability to protect each customer’s proprietary data.

• The UCP’s service management infrastructure that monitors and manages service levels.

• The service culture of the UCP. This is the most important factor. Utility computing is a service, and only superior customer-service-oriented companies will deliver successful utility computing services.

If all these ingredients are not in place, it is likely a UCP will not be able to deliver on its promises, and its clients will suffer disruptions to their operations and financial repercussions to their businesses.