Adventures In Utility Computing

The business of utility computing.

Thursday, June 15, 2006

Defining terms, Is Utility Computing SaaS?

Many in the industry use the terms Utility Computing, Software as a Service, Application Service Provider and Grid interchangably. This can lead to a bit of confusion. Let me provide my definition:

  • Utility Computing - The provisioning of compute resources as a utility. Sun Microsystems $1/CPU/hour effort is an example of this.

  • Software as a Service (SaaS) - The provisioning of an application as a service to a customer. SaaS can be a utility but a utility can not be SaaS. ConstantContact is an example of an SaaS company. In this instance, ConstantContact provides both the compute resources and the application.

  • Application Service Provider - This term is out of favor and not used as much anymore. Companies in this space were more Utility Computing providers. Exodus is an example of an ASP. They sold "outsourcing" of your applications to their datacenter. They defined the fee they charged you in Utility Computing terms, i.e. technical.

  • Grid Computing - The ganging of processors together to accomplish compute intensive tasks. Sometime this also refers to ganging more than just the processors together and includes storage.
Distinction between these terms is critical to sorting the players and watching the industry mature.

Saturday, June 10, 2006

The Sisyphus Problem - The Net Defect



Meeting the quarterly revenue goals selling computer hardware is a Sisyphean task in itself. The technology trends associated with computer system development makes the task more difficult.

Selling a certain amount of computer equipment represents a certain amount of CPU, memory, disk and in some cases bandwidth. Given that cost of all of these components is decreasing makes it more difficult to acheive flat quarterly revenues. IDC reported in their February 2006 Worldwide Quarterly Server Tracker:
Volume systems grew 7.3% year over year and the segment continue to be the catalyst for growth for the server market overall, gaining favor with SMB and enterprise customers alike. After four consecutive quarterly increases, revenue for midrange enterprise servers declined 11.5% year over year and the high-end enterprise server market showed a 1.7% decline year over year, the fifth consecutive quarter of declining revenue for high-end enterprise servers.
Basically, customers are buying more processing, storage, memory and bandwidth than ever, yet traditional hardware manufacturer's revenues are in a tail-spin. The question is how can these manufacturers take advantage of the technology trends instead of being a slave to them.

Friday, June 02, 2006

Software as a Service Myths?

BusinessWeek has an interesting article on Software as a Service. The article explores 7 myths about Utility Computing. One of the Myths is:

SaaS is just another version of the failed application service provider, or ASP, and hosting models of the past, and will suffer the same fate as its predecessors.

I agree with the author, this is a myth. Though my reasons are a bit different. ASP's had trouble in the past because:
  • Technology was not mature enough to deliver applications as utilities.

  • Pricing models hid the value of the utility.

  • ASPs sold against their natural partners.

  • ASP solutions are technically oriented and horizontally priced.
Contrast this with Salesforce.com. Internet technology is mature enough to provide their software as a service. Unlike traditional ASPs, they are not selling bits and bytes, their pricing model connects to the users in their terms . Their solution is business focused and vertically priced, the price connects directly to the benefit the customer derives in using the service.

There is a distinction between providing compute resources like a traditional ASP and providing Software as a Service. Similar to the distinction between electricity as a utility and a toaster being a toasting utility. It is this distinction horizontal vs vertical solution orientation that really differentiates the SaaS models from the ASP models.

Thursday, June 01, 2006

Technology "Laws" driving the shift

There are a number of technology laws driving the shift in the economy from atoms to bits. Among these are Moore's Law, Metcalfe's Law and Gilder's Law. These three laws together drive the industry faster than any one of them on their own and were described at Sun Microsystems as the Net Effect. Graphically it would look like this:

The question is where will the processing be done? One perspective is that the net will do the processing. John McCarthy, noted Stanford computer science professor said in 1961:
"If computers of the kind I have advocated become the computers of the future, then computing may someday be organized as a public utility just as the telephone system is a public utility... The computer utility could become the basis of a new and important industry."
The shift as envisioned by McCarthy hasn't happened yet. I believe that McCarthy's vision of utility computing will enable Negroponte's transition from Atoms to Bits. In some respects this is happening. I will write more on this in upcoming posts.