Archive for April, 2008
Sunday Business Post – Computers in Business magazine – April 6 2008
Read this story on the SBP website by clicking here.
Utility computing will allow companies to utilise a system that suits their needs, writes Dermot Corrigan.
Many of the services Irish consumers and businesses use on a daily basis are delivered on a utility basis and paid for by usage. For example, we flick a switch and the radio comes on, we turn the tap and water comes out, and we pick up the phone and make a call. Nobody worries about buying a generator to generate electricity, a well to provide drinking water, or their own telephone exchange to connect with the outside world.
It was not always thus. It was only at the end of the 19th century that large utility companies were formed to take the work in generating power, providing water or running the telephone system away from the general user, and provide electricity, water and phone calls as a service.
Now, in the early 21st century, a similar process is underway which, if leading industry figures are to be believed, will mean that soon businesses and consumers will no longer need to have their own computing infrastructure – servers, networks, storage units etc, etc – but will receive and pay for al l of their computing requirements as a service, delivered over an internet connection.
Utility computing is coming.
“The utility computing model is very similar to electricity, gas or telecommunications,” said Ciaran Doherty, sales director at Horizon Open Systems.
“People come in and hit the switch and it comes on. They pay for what they use and they do not pay when they do not use it. A hundred years ago people had generators, but now they are connected to the national grid.”
Doherty maintained that the way IT has been delivered has been evolving in this direction for some time.
“There was facilities management in the 1960s and 1970s and outsourcing in the 1980s and the shift towards application server provision at the height of the dotcom boom and now the shift towards the utility computing model,” he said.
With utility computing, computing resources are consolidated into large systems by the utility providers. Users draw down the computing power they need from a central system as required, instead of having a number of dedicated systems running individual functions or applications in-house.
“Up until a couple of years ago most organisations bought what were referred to as stove-pipe platforms,” said Doherty.
“For example that meant if you were a telecoms provider, you had a particular platform for your SMS solution and a particular platform for your billing solution, and so on. They were al l identical, but they were all just there to support the particular individual function. You only used the testing and development systems when you were testing and developing something. The rest of the time it was just sitting there.”
Until now businesses were required to buy systems that were capable of meeting the company’s maximum usage requirement, Doherty said.
“You would buy the platform based on your maximum peak usage at a given point of the year, it could be Christmas or summer or whenever,” he said.
“You needed to be able to deliver your service to your customers at that time, so you needed that maximum computing capacity and you had to purchase that up front to make sure it was there when you needed it.” Most companies therefore had the majority of their computing resources lying idle the majority of the time.
“The utilisation of IT in Ireland is about 25 per cent,” Doherty said. “Companies buy capacity based on peak usage time, whether it is end of month, quarter or end of the year. That is a huge cost, as whether the machine is operating at 95 per cent or 5 per cent of its capacity, it is still costing money to power it, to house it and to manage it. They are very significant costs.”
IBM is currently investing heavily in utility computing, or ‘cloud’ computing as it refers to the concept. Last month it opened Europe’s first cloud computing centre in Ireland. The centre, at the IBM Innovation Centre in Dublin, will offer computing power to customers, and will give companies in Europe the ability to use virtual computing power to spur technology research and business development.
The aim of the centre is to replace the traditional data centre model in which companies own and manage stand-alone hardware and software systems, according to Po/l MacAonghusa, business development manager with IBM’s strategy, development and innovation team in Dublin.
“We are setting up a lot of hardware here, probably about 100 CPUs [central processing units] in our cloud here in Dublin,” said MacAonghusa. “IBM has built up a framework of software based on our products and various projects we have worked on with partners around the world. We will look after EMEA [Europe, Middle East and Africa] from Dublin. It is up and running now and we will be hosting our first customer event this month and we will be running live on the cloud here in Dublin.”
MacAonghusa said users utilising the ‘cloud’ would just plug in and start to work, without having to invest in and manage all the infrastructure that traditionally comes with a traditional IT solution.
“Cloud computing is a flavour of utility or shared resource computing,” he said. “The analogy that people usually refer to is the internet. You, as the user, are not really aware of the size of the internet. It is all hidden from you behind the browser. Even though there are hundreds of thousands of machines, physically linked together with wire, you really have no view of that. In effect, it is a cloud.”
MacAonghusa said utility computing removed any technical concerns, giving an unhindered user experience.
“I just log on to a nice portal or web interface and say: “For my payroll I would like to use this number of computers’‘.
And the management software would look after al l the physical provisioning of those systems and make them available to me in a matter of minutes,” he said.
“In other words, the management software can dip into the cloud and find you the resources that you need and make them available to you so that you can run your application inside the cloud without worrying about configuring the different systems and applications that are required.”
IBM will offer the use of the ‘cloud’ within the Dublin centre to its Irish customers, according to MacAonghusa.
“We will have a utility or cloud computing environment available on demand to Irish clients,” he said.
“We will have a significant services team, involved in client engagements, providing hosted services and we will also have the know-how and personnel available to help them with their projects and make them a success.”
The utility computing concept is quickly gaining pace. IT giants such as Microsoft, Oracle and Google are working on their own utility computing projects. Smaller Irish companies, such as Hosting 365, are gearing for the arrival of ‘hardware as a service’ provision.
GRID Ireland, run by the Higher Education Authority, is connecting university systems together to provide a utility-like service for Irish researchers, while SAP has a research Campus-based Engineering Centre (CEC) in Belfast with links to both the University of Ulster and Queen’s University Belfast, which is developing ‘Business Grids’ to become the ICT backbone of the future.
Doherty said a number of factors were coming together to encourage the growth of utility computing.
“Virtualisation technology has really taken off – that is, the ability to pool IT server and disk resources together to deliver maximum utilisation on a given platform,” he said.
“The other thing that is happening is the concept of software as a service. This was one of the blockers to utility computing over the years because everybody had bought perpetual licenses for their software. They were paying for that license, typically on a per-user basis or a PC basis. You bought it and you could use it forever. All the global software vendors are stampeding to get into software as a service licensing models.”
Doherty said that anyone buying software as a service, or on-demand software products, such as salesforce.com’s CRM solutions, was in effect already getting into utility computing.
“If you are buying software as a service, well then the underlying platform is going to be delivered as a service,” he said.
“In essence then you are buying your computing power as a service, and your CRM and your ERP as a service. That is driving the whole thing forward.” Software providers are pushing the idea of SaaS and utility computing, as it makes business sense for them.
“They are all trying to get recurring revenues and predictability in their own revenue cycle,” Doherty said. “If you have customers who are paying you on a monthly, quarterly or annual basis, that is guaranteed revenue, so Wall Street love it.”
Hooking up to grid
Doherty said that most businesses should be interested in utility computing, as it has the potential to move investment in IT from the capital budget to the day-to-day expenses.
“The customers love it themselves, because you are reducing their capital costs substantially,” he said. “They are only paying for capacity when and where you need it.”
Utility computing al lows managers to see exactly how much their computing power is costing, and clearly relate their IT expenditure to the returns generated, according to Doherty.
“Utility computing allows people to map IT directly onto business value,” he said. “You are paying for IT directly in line with the business value that arises from it.”
MacAonghusa said there was potential for IBM’s existing Irish customers to migrate from their current in-house servers or data centres into the new cloud model.
“The individual IBM client teams will work with their clients to decide whether to do that,” he said.
“The capability is there, for a certain number of customers, particularly in the small and medium sized business sector, cloud may well be a serious consideration, because it allows them either to go for a hosted service where IBM could manage their IBM resources with them, or the cloud offers them an opportunity to begin to optimise their own resources.”
Doherty said most companies would move gradually from their existing hardware infrastructure towards the utility model.
“People are going to get into utility computing based on their use of specific applications,” he said.
“If you are an SME you could easily get into this environment, rather than purchasing software in the traditional manner you purchase it on a subscription basis. You are logging on via the web to use that application and at the same time you are paying for hardware that is running that on a subscription basis.”
MacAonghusa said that as companies required more and more computing power, they would be drawn to the utility model.
“From our own experience we have seen that as a team grows, the number of servers required to keep everybody happy grows quite dramatically,” he said. “A lot of these server machines are under utilised, so the cloud allows you a way of consolidating a number of servers so that more and more applications can use them.”
Impact on IT
One reason why some companies were slow to recognise the merits of utility computing was that it was viewed as a threat by IT professionals within organisations, Doherty said.
“It reduces your need to have a level of expertise in house and the need for complex and expensive hardware installation,” he said. “So IT departments saw utility computing and managed services as threats to their own jobs and environment.”
This situation is changing, however.
“They now realise they can offload a lot of the general, mundane tasks that they were doing in relation to operational upkeep, and now focus on the more strategic end of the business from an IT perspective,” said Doherty.
Enterprise Ireland’s ebusinesslive.ie newsletter – March 25 2008
Read this feature on the ebusinesslive.ie website by clicking here.
The software-as-a-service (SaaS) model has become an increasingly viable way for companies to run their IT systems, and for Irish software developers to sell their products. The SaaS model involves the delivery of applications as a service over the internet rather than on a CD that has to be installed on the customer’s server, network or PC.
The concept of SaaS was pioneered by US customer relationship management (CRM) software developer Salesforce.com in 1999 and has developed quickly since then. SaaS or ‘on-demand’ models are now used to deliver a wide range of software products, from accounts packages to word processors to video editors.
Cork-based telecoms software business VoiceSage has developed a product under the SaaS model that allows clients to make automated telephone calls to their customers. VoiceSage’s director of innovation, Paul Sweeney, said SaaS offers many advantages to customers.
“The typical benefits are speed of implementation and ability to buy IT as product,” said Sweeney. “Why bother with an install when I can get everything I need, right now, and I know that it works? People are buying a pre-packaged benefit, that they can measure and experience quickly.”
Companies using SaaS also encounter negligible in-house support costs, according to Sweeney. “A software-as-a-service solution will not need IT service support, so your IT guy does not need training and does not have one more piece of kit to support.”
But before embarking down the SaaS route, you must ensure you have an IT set-up that allows you to take full advantage of the model. Companies using the internet to access an application must have fast, reliable and secure access, says Sweeney. “If you have heavy information or data crunching you may experience some delays. This can be frustrating to users, especially if you are looking to execute a trade or answer a live customer query. In some situations you may want to conduct a security audit. This is especially true if [you] are executing anything to do with credit cards.”
The SaaS model also makes increasing sense to software developers themselves. Sweeney says VoiceSage always planned to sell its products as a service. “SaaS was central to our whole vision right from the start. We knew that the trend for SaaS would take off.”
VoiceSage’s products are marketed as business problem-solvers, not as IT solutions. Sweeney says the SaaS model allows software companies to offer a flexible and adaptable product to customers. “We built the software to be pure SaaS, so it could be simply integrated with other systems. We also knew that the adoption cycles were likely to be more favourable for hosted solutions, and it scaled from a business point of view.”
‘iTunes’ for business
As well as supplying the delivery method for SaaS products, the internet can also be used by Irish companies to market and sell their solutions. Last year Salesforce.com launched a service called AppExchange, which allows any company to sell online any SaaS product that is compatible with its CRM software.
“AppExchange is a lot like iTunes – it is a place where anyone can go and see if there is something they can use,” says Colm Mulcahy, CEO of Saaspoint, an Irish company certified to deliver Salesforce.com solutions. “It is a very good place for people to go and identify applications they can simply download at a very low cost.”
AppExchange only accepts applications compatible with Salesforce.com products, but Mulcahy said a wide range of applications are suitable, from billing software and business intelligence reporting solutions to project management applications. “Salesforce.com audits the application submitted to make sure it has the right standards and fits within their environment,” he said.
According to Salesforce.com, there are currently around 800 applications available on AppExchange. Skype, Cisco and Google have all developed and uploaded applications to the platform. Saaspoint itself has three applications available on the platform, and Mulcahy says any Irish developer with a good product could compete with these IT giants on an equal footing.
“If you are a small software operation, with maybe one or two developers working on a particular application, and you publish it on the AppExchange, you have access to a global market,” he says. “One of our applications – a timesheet and expense application called TimeTrack – is generating approximately 100 inquiries for us each month.”
Once the application has been accepted and uploaded, anyone can access the software through the AppExchange portal. Customers typically download a free trial of the product, and then deal directly with the developer if they are interested in purchasing it. “There is a licence price per user and the customer will engage directly with the developers and pay them directly for the licenses they use,” explains Mulcahy.
Last year, Saaspoint founder Frank McCracken told an Enterprise Ireland Summit in Dublin that SaaS represented both an opportunity and a threat to the Irish software sector. “The big barrier to international success has been the ability to distribute [software] globally. This problem can be solved by using internet platforms. Suddenly companies of any size, no matter how small, have access to a real platform for global distribution.”