Give Jonathan Schwartz credit for chutzpah. The president and chief operating officer of Sun Microsystems (SUNW) wants to do nothing less than commoditize the high-end computing business. He says his secret weapon in the cost-cutting wars will be eBay (EBAY), a company that knows a thing or two about moving commodities.
Schwartz says Sun will offer by yearend a new computing service, called the N1 Grid Service, that will allow customers to buy all the processing power they need on an hourly basis. The price is just $1 for every hour a customer uses a computer processor, or CPU. Customers will be able to buy computing power with little more than a credit card and a Web browser. "You won't have to sign a long-term deal or anything. It's really the only service out there like this," boasts Ashif Dhanani, director of utility computing at the Santa Clara (Calif.) company.
WACKY OR WORTHY? No doubt, renting computer services like a utility through eBay sounds a bit odd. But it's a typically unconventional move for Schwartz, a pony-tailed executive who took over the vacant president's job at Sun in April. This is an exec, after all, who promised his board of directors that he would get Sun, stuck at the time in a three-year revenue slide, growing within a year. True to his word, it has eked out sales growth two quarters in a row.
So don't brush Schwartz -- or his wacky schemes -- off too fast. The new utility computing service could appeal to a wide variety of tech-savvy customers, from big investment banks that may want a little extra power to run risk-analysis simulations to biotech startups that can't afford their own supercomputer but need to do rapid-fire drug design.
Though the service will initially run on Sun's own Web site, the ultimate plan is to include eBay as a marketplace to auction excess capacity at prices that could dip below the announced rate of $1 per CPU per hour. "We might put the whole thing on eBay for a down time such as Thanksgiving Weekend and say 'Come bid for it,'" says Dhanani.
"CULTURAL" ISSUE. Is this a meaningless marketing ploy by the talkative Schwartz or a real shift in the computing landscape? Sun insists it's a serious business, though many analysts aren't sure. Sun has historically made its profits from sales of giant computer systems. Utility computing, which allows lots of cheap servers to operate like one big one, would seemingly undercut Sun's business.
But Schwartz is unflinching. He says the technology is all there for this to be a reality, and Sun itself is now aggressively selling the kinds of low-cost servers analysts say is wrecking the Silicon Valley giant's business. Most important, Schwartz believes customers are ready. "The issue is not a technical one," he says. "The issue is a cultural one." Tech managers will have to be willing to give up some control of their data in order to get to the low-cost advantages of the utility service.
If Sun delivers on this promise, it will take the fledgling utility computing concept into a low-cost realm where CPU cycles on someone else's computers are traded like corn or oil. It seems like a natural evolution for a maturing industry. Even if Sun's gambit doesn't work, analysts figure someone will eventually make a concept like this work.
WASTED RESOURCE. "The future is along the lines of a use-as-you-need-it service where you will be billed for capacity. The system will be largely automated and tied into a structure," where customers are billed in increments of a penny or even less, says Rob Enderle, principal of the tech consultancy Enderle Group, in San Jose, Calif. Just like an electric bill.
The attraction of such a system is obvious. Computer hardware and software is expensive to buy and maintain. All too often they're not being used while they're sucking up electrical power.
According to a survey conducted by Sun, companies that do seismic mapping for oil-field development, for example, are running the software and hardware need to perform these tasks only 30% to 60% of the time. Consider the other 30% or 40% wasted time and money. Sun and others want to give customers a way to rent this underused gear while increasing the rate the equipment is actually being used.
NO CONTRACTS. Specifically, Sun will let users upload their software onto one of two 1,000-CPU grid-computing facilities. These are specially constructed supercomputers that harness all those processors and train them on one big problem. The system will support software running on top of Sun's own Solaris operating system as well various versions of the Linux open-source OS. At the end of the computing job, Sun will wipe out all traces of a customer's software and data.
So how is this pay-as-you-go offering different than other computing services? For the most part, utility computing contracts run for at least a year. Often, they last as long as five years, say Enderle and other analysts. IBM (IBM) has multiyear contracts with financial-services giant American Express (AXP), telecom company Qwest Communications (Q), and European financial services firm Nordea. While they have a pay-per-use component, these deals also entail regular maintenance fees.
In contrast, you can buy Sun's service over the Web with no onerous usage agreements and no nasty haggling. That could prove attractive to sophisticated small companies with small tech budgets. Even big users could be attracted, says Dhahani, because they like the idea of paying only for what they use and nothing else. He claims everyone from Wall Street firms running big market simulations to biotechs doing drug design have expressed interest. "All we know is that everyone is interested in more [CPU] cycles all the time," he says.
GRAND EXPERIMENT. Sun has offered prospective customers the chance to test-drive the system for an hour two to see if it's everything Schwartz has promised. Dhanani says he has received lots of inquiries, but he declines to say exactly how many companies have signed up for the trial.
That said, even Dhanani admits the N1 Grid Service is a grand experiment as much as anything else. The $1-per-CPU-per-hour figure is a nice round number and a starting point. Although it has beta customers for the service, Sun isn't revealing who they are.
McNealy & Co. also face tough competition from the likes of IBM and Hewlett-Packard (HPQ). "For them to take this and go to an IBM shop that has no experience with Sun, I think it would be extremely difficult sale," says Andrew Andrew Efstathiou, an analyst with Yankee Group, a Boston-based market researcher. There's a risk Sun could cannibalize its own server business with the service, rather than attract new customers.
MORE LEEWAY? IBM execs aren't taking the Sun service very seriously. "Customers don't call up and say 'I need an hour.' They say 'I'm trying to accomplish this. Let the meter run. It's job-related,'" says Jim Corgel, a general manager at IBM Global Services. Corgel says IBM offers similar over-the-Net computing packages that give customers more leeway by allowing them to finish whatever computing task they may have started without worrying about the number of processors or hours it takes to get the job done.
Still, putting computer time up for rent on eBay is certainly novel. If Schwartz can make renting time on big machine as easy as downloading music, he just may find that his big talk is being backed by a big customer list. By Alex Salkever, Technology editor for BusinessWeek Online