IBM Bets $10 Billion on On-Demand Computing

New York—Speaking before a group of about 300 customers assembled at the American Museum of Natural History, IBM CEO Sam Palmisano outlined a $10 billion bet the company is making aimed at making “On-Demand” computing an enterprise computing byword.

In a carefully scripted presentation, which did not include any opportunity for media questions, 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 PeopleSofts “Real time enterprise,” Microsofts “.Net” and Suns “Sun ONE” monikers. The on-demand term 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 and diverse computing applications and operations. With each vendor proclaiming allegiance to open standards, development tools that can span many applications and huge financial benefits as a reward for their efforts, users are confronted with the confusing situation of many vendors all claiming to do essentially the same thing.

If the past era of enterprise computing was marked by vendors championing proprietary approaches to give customers an IT strategic 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. The environment has integrated systems, open standard software, virtualized software that allows more efficient use of IT resources and autonomic or self-managing systems to reduce complexity in the IT environments.

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In the slides accompanying his presentation, the number of companies entering the on-demand phase was miniscule compared to the firms now in what IBM defined as the access or enterprise integration phase.

IBM 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.”

During his remarks, Palmisano said he saw indications that the current economic downturn and 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.