Tuesday, November 29, 2005

on demand computing

IBM has a new initiative called “on-demand computing”. The idea seems to be that computing is a service: instead of buying a bunch of computers, you buy as much computing power as you need. Microsoft has poo-pooed the idea – they’d really prefer to sell copies of applications and operating systems that run on desktop boxes. For a great bit of social commentary that ties Microsoft’s response into the battle over open source Linux licenses, which seems to really be an ongoing battle between IBM and Microsoft, see today’s User Friendly.

The idea of computing as a service isn’t new. In fact, I think it shows up in 50 year old Isaac Asimov stories, where there’s One Big Mainframe supplying computing power to a whole city. It’s an interesting idea, though. If done right, switching your business model from selling products to services can change the whole incentive structure in some very useful ways.

For example, consider a company that sells air conditioners. Their incentive is to sell you as big an air conditioner as they can, and to reduce their cost of goods sold as much as possible. Now change their business model to one in which they sell the service of providing cool air using whatever means they choose. Now they have an incentive to install insulation in the building, to provide a properly sized air conditioner that that’s going to be very durable (because they continue to own it and can reuse it somewhere else if you cancel your “coolness” contract) and efficient (because they pay the cost of electricity).

The same thing could happen with computers. If – and it’s a big if – IBM can provide computing services, they’ll have an incentive to make their computers efficient, secure, easy to maintain, and recyclable or at least reusable.

On the other hand, it’s a big technical challenge. For instance, imagine the potential headaches when they want to upgrade the word processor everyone’s using, or if a network disruption cuts access to business critical software. It’ll be interesting to see if Big Blue can pull it off.

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