Editorial: The road to utility

As any industry matures, the companies competing against each other are forced to come up with new ways to differentiate themselves from their competitors. That is how business works.

The most obvious ways of doing this include offering lower prices, improved quality or better customer support services. But several of the major IT vendors are working on methods of differentiation that will change the industry beyond all recognition - IBM calls it On Demand while Veritas talks of Utility Computing.

Sun has perhaps made more progress than any of its competitors in attempting to move to a service-based model. Last month, COO Jonathan Schwartz used his blog to discuss the introduction of its N1 Grid 'computing plan'. The basic idea is that the customer gets to use the operating system, CPU, memory and storage facilities for an hourly rate of $US1 per CPU.

Schwartz has called the plan a stake in the ground, and any form of on demand or utility computing is undoubtedly attractive to end users. After all, it will stop them overpaying for unnecessary infrastructure or outgrowing their existing IT framework and being forced to upgrade. But what will it mean for the channel?

Technological advances predominantly start out at an enterprise level before working their way down the food chain and the shift to a service-dominated IT model will be no different. So the kind of end-users that are affected in the short term will be major financial institutions and government bodies that already have direct relationships with vendors such as Sun, IBM and Veritas.

But as the model takes hold, which seems inevitable at some stage, mid-sized organisations and eventually small business will want to take advantage of the benefits. This is when the broader IT channel will face some serious changes to the way it does business.

There will definitely be some headaches along the way in educating customers on the benefits of paying for technology on a drip feed basis rather than owning their own equipment.

But some doomsayers have gone much further, predicting a subscription model could spell the end of reseller channels in the IT industry. If technology does become a utility like electricity or water, it has been argued, maybe there will no longer be a need for the middle man. After all, we don't buy our water supply from a reseller.

But we must be careful when using the term utility about computing because it can never be as simplistic as the everyday utilities the major vendors are comparing it to in order to sell the concept.

Technology is (and will remain) complex in nature and small business is not likely to reach a level of comfort where it can pick up a phone and order what is needed directly from the vendor.

And as long as customers need independent third-party advice about what equipment they should be using, as well as installation and maintenance assistance, there will be room for the channel to ply its trade.

As vendors look to iron out the bumps in current revenue streams by moving to utility computing, the channel will also benefit from having a clearer idea of how much money they will make this month, next month and the month after that. It will help resellers plan for growth when business is good and give earlier warning signs when trouble is ahead.

Dealers have little choice but to follow major vendors along the road to utility, but it seems likely to be a worthwhile journey.