Report: Utility Computing Requires New TCO Approach

Report: Utility Computing Requires New TCO Approach
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A Yankee Group study says it could be a decade before the computer industry gets the most TCO efficiency out of utility computing, which aims to respond cost-effectively in a constantly changing business environment.Enterprise IT managers are becoming more sophisticated planners and negotiators when it comes to implementing utility computing systems capable of responding in a cost-effective way to dynamic business conditions, according to a report by market research firm The Yankee Group.

The report on the TCO (total cost of ownership) for utility computing says IT managers need to obtain better analytic tools to support purchasing decisions in a dynamic business environment.

Since the dawn of commercial IT systems, corporate managers have always built new information-processing applications with the assumption that they will run unchanged as long as the business exists, said Andy Efstathiou, a business and IT services analyst at The Yankee Group and the reports author.

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But todays IT managers must be able to plan for IT systems that can adjust to changing business conditions, Efstathiou said. This means they will have to account for changes in the "duration, volumes and prices in business processes" that are automated by IT systems, he said.

This is particularly true since corporations want their IT organizations to evolve from cost centers to a "profit or service center utility," Efstathiou said.

Click here to read an interview with Hewlett-Packard executive vice president Ann Livermore about her companys new Technology Solutions group.

Utility computing has the potential to allow IT managers to substantially reduce the cost of providing information resources to support steadily changing business conditions, he observed.

But most utility computing services on the market are just starting to make a transition to a true on-demand model, where resource consumption can rapidly adjust to changing business conditions, he said.

Part of the problem is that each vendor defines utility computing in a way that conforms to its own marketing strategy. Efstathiou defines it as a way to dynamically provision IT resources as on-demand services. But the industry hasnt fully managed to get utility computing to be as resilient as it needs to be to respond to dynamic customer demands.

Efstathiou likened it to ordering a drink at a bar. "People understand how to pay by the drink. But nobody knows what the definition of a drink is," he said.

Next Page: Taking a new approach to TCO.

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