Palmisano Unveils His $10B On Demand Vision

IBM CEO Sam Palmisano is thinking big. Speaking before a group of about 300 customers assembled at the American Museum of Natural History here last week, the CEO—and newly named chairman, effective Jan. 1—outlined a $10 billion bet the Armonk, N.Y., company is making on what it calls "On Demand" computing.

In a carefully scripted presentation, Palmisano described the On Demand concept as an IT infrastructure that allows an organization to be responsive, variable, focused and resilient.

"The On Demand business fundamentally requires a different approach to how we design and build systems," Palmisano said.

The presentation marked the first major public outlining of IBMs strategy since Palmisano was named CEO earlier this year. The $10 billion investment includes capital investments, acquisitions, and marketing and advertising campaigns geared toward making the On Demand computing approach a widely known term.

IBM will have lots of company in trying to gain the upper hand as the terminology leader for the next stage of enterprise computing. On Demand joins PeopleSoft Inc.s "real-time enterprise"; Microsoft Corp.s .Net; former Compaq Computer Corp.s Computing on Demand; and Sun Microsystems Inc.s Sun ONE, or Open Net Environment, monikers. On Demand has the added burden of trying to distinguish itself from the now largely discounted concept of utility computing, where outsourcing organizations promised to provide companies with computing resources based on demand.

The common theme among all the vendors is the offering of an easy path to integrating a companys disparate computing applications and operations. But with each vendor proclaiming allegiance to open standards, development tools that can span many applications and huge financial benefits as a reward for their users efforts, users are confronted with the confusing situation of many vendors claiming to do essentially the same thing.

If the era of enterprise computing was marked by vendors championing proprietary approaches to give customers a strategic IT advantage over their competitors, this era is marked by vendors championing standards-based computing to allow easy interaction between a company, its suppliers and its customers.

Palmisanos outline of the On Demand operating environment had four characteristics: integrated systems; open- standard software; virtualized software that enables more efficient use of IT resources; and autonomic, or self-managing, systems to reduce complexity in IT environments. In slides accompanying his presentation, the number of companies entering the On Demand phase was minuscule compared with the number of companies now in what IBM defined as the access or enterprise integration phase.

Palmisano provided the definition of an on-demand business as "an enterprise whose business processes—integrated end-to-end across the company and with key partners, suppliers and customers—can respond with speed to any customer demand, market opportunity or external threat."

In his remarks, Palmisano said he saw signs the economic downturn, especially the IT doldrums, may be ending. "We are operating in one of the most difficult and complex business environments that any of us have participated in during our business careers ... but as I travel around the world, I see some encouraging signs that perhaps we have hit the bottom," he said.