Utility Computing Model Flaws

Jeff Clarke of Dell points out some of the flaws in the comparison of IT to electricity:

For starters, the utility analogy assumes every company uses technology in the same way. We know that is not true. Some companies invest most of their IT resources on development projects that accentuate their competitive advantage. Others are slower to adopt new technologies but have customized infrastructures that enable better service for their industry.

In a utility model, the first company would have to accept the same service level as the second–something that would be unacceptable to both. An alternative composed of a proprietary mix of the services is sure to cost more and be less likely to change with the dynamic business world.

Another assumption is that companies are willing to give up the keys to their technology infrastructure to an outside company. That leap of faith assumes outsiders will know the business as well as the insiders and will be similarly motivated to protect critical data and applications. As with the failed service provider model, we know that most customers simply don’t buy this approach.

A third flaw in the argument is the assertion that the economics of IT and utilities are the same. The reality suggests otherwise.

While utilities may develop around products that require large capital investments to achieve optimal cost-efficiencies, you don’t find many companies building their own private power plants. Most enterprises cannot use more than a fraction of the capacity of an optimal-size power plant. It is simply more economical to purchase electricity from an electric utility.

In contrast, IT infrastructure is increasingly being built on industry-standard building blocks that provide more capability at ever-decreasing costs. This means that almost any enterprise can achieve a cost-efficient infrastructure dedicated to their exclusive use.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.