Big Blue's Tech on Tap

IBM wants business to farm out its computing--to IBM

While Microsoft (MSFT ) and America Online (AOL ) battle for control of the consumer Internet, IBM (IBM ) has quietly been constructing its own grand plan to rule the lucrative world of corporate computing. The idea is to put Big Blue at the forefront of a movement in which companies farm out their computing needs to utility-like providers. Instead of having to constantly buy, maintain, and upgrade the latest technology, IBM envisions a simpler world in which companies would buy computing power and programs on an as-needed basis, just as they do electricity from power companies. IBM is investing billions to turn the vision into reality.

The latest development: On Aug. 2, IBM announced its Grid Computing Initiative, a project to provide any desktop with supercomputing potential via the Net. IBM Vice-President Irving Wladawsky Berger, the plan's lead architect, says grid computing promises to make personal computers more powerful by harvesting idle power from other computers. It will also let workers collaborate on sophisticated applications via high-speed networks. "Just as you saw Web technologies go from the scientific world to the commercial world," says Berger, "we see grid computing doing the same."

HUGE POTENTIAL. So how would it all work? A pharmaceutical company, say, could tap into a grid to let a group of researchers run a complex simulation that would help design a new drug. Right now, a drugmaker would have to fork over millions of dollars for a supercomputer to perform that task. Such prospects have piqued interest in the corporate world. Steve Neiman, J.P. Morgan Chase & Co.'s head of high-performance computing, believes on-tap technology would not only help the bank cut computing costs but also let it more quickly ramp up or cut back computing power. "It will be a great thing for us," says Neiman.

The potential market for on-demand computing could one day be huge. International Data Corp. (IDC), the technology-research firm, estimates the market could reach more than $30 billion later in the decade. Big Blue, of course, isn't the only company chasing that fat opportunity. Over the past two months, Compaq Computer (CPQ ), Hewlett-Packard (HWP ), and Sun Microsystems (SUNW ) have all announced plans to work on early stages of on-tap computing. Tech consultants such as Electronic Data Systems Corp. (EDS), and even telecommunications companies, also want a piece of the action. But many industry experts insist that IBM's financial muscle, world-class research labs, trusted brand, and breadth of products and people put it in the best position to profit from the shift. "They just have all the right ingredients," says Karen Benson, an analyst with Gartner Group Inc.

Grid computing is only one part of IBM's overall strategy to dominate the future of corporate computing. At the same time the company is building the software and hardware needed to move computing fully on-tap, it is readying its army of consultants to build and sell grid-based services. Those services could help workers perform mind-boggling computing jobs in industries from manufacturing to banking. Already, the company's Web hosting unit, the world's largest, is investing some $4 billion to build 50 new corporate data centers--in addition to its existing 175 data centers--which when linked together will power the grid. "All of these capabilities are absolutely needed to make e-business successful in the future," says Berger, who heads the grid project as well as other key development efforts.

To be sure, tech-on-tap is years away. It is also rife with challenges. The most pressing problem is to develop the software needed to reliably manage the complex grid. But the ingredients are starting to gel: IBM's $1 billion investment in the Linux operating system looks like a smart bet, since much of the software being developed to run grids is based on open-source models, in which computer code is shared. IBM rivals such as Microsoft Corp. and Sun, meanwhile, have spurned open-source computing in order to promote their own proprietary systems. Early this year, IBM's consulting arm, the industry's largest, began selling Web-based services that manage purchasing, storage, and other tasks for corporations. It's still early, but IBM's grand plan is off to a good start.

By Spencer E. Ante in New York

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