Measurement and pricing issues
Benchmarking is essential to promote internal comparison and competition and to quantify both the impact of constraints, as well as the “size of the prize” in terms of the potential improvement opportunity. In this context, benchmarking becomes much more than a discrete, tactical exercise focused on pricing of a particular service. Rather, it becomes a tool to assess the existing environment, model and assess alternatives, define pricing mechanisms, and develop a change plan.
The beauty of the utility model is that, rather than pay for, say, servers, business users pay a specified amount for CPU time. This creates an incentive for the service provider to drive efficiency in the delivery of that CPU resource, as greater efficiency equals higher margin. The customer organization, meanwhile, has an incentive to utilize CPU resources more wisely, as every CPU minute consumed has a cost attached to it.
Unfortunately, the reality falls a bit short of this scenario.
Most internal and external IT groups today do not have monitoring that can measure and log CPU minutes. Moreover, a CPU minute on one machine can represent more or less processing than a CPU minute on another machine, so raw CPU minutes cannot be used for utility billing.
Cloud services like Amazon Web Services are beginning to address this problem by charging for access time to a server instance. Here, if you use it you pay for it, regardless of how many CPU minutes are required.
The approach of some traditional outsourcers is to charge for server “slices” that represent a fixed amount of compute capacity. Under this model, if you allocate it you pay for it, regardless of actual usage. While not true utility computing, these methods are delivering some of the benefits of increased transparency and demand management.
Another significant issue is software licensing, which is often not compatible with the utility model. A per-server or per-processor license does not lend itself well to usage based billing, whether provided internally or externally. Although some steps are being taken on this front, more remains to be done.
The benefits of true utility computing can only be realized through improving the commercial relationships and operational processes involved in the delivery and consumption of IT services. The significant obstacles that remain are not insurmountable. They are, however, impervious to silver bullets.
Max Staines is North America president of Compass Management Consulting.