HP: Showing How to Use What You've Got

The Internet boom and Y2K crisis sparked equipment-buying frenzies that left many companies with bloated technology departments. Analysts estimate that gear in corporate data centers typically is being used at only 15% to 30% of its capacity.

Now, Hewlett-Packard Co. is spinning out innovations aimed at solving the problem. The cornerstone of HP's strategy is its Utility Data Center. Hatched in late 2001, it combines hardware and software to "virtualize," or pool, computing resources scattered throughout a company. Using HP's OpenView network-management software -- a sort of command console for computer networks -- staffers can shift around computing capacity with a mouse-click. "Instead of thousands of computers, you've got one big pool of computing power," says Nick van der Zweep, HP's director of utility computing.

The HP offering is part of a larger shift in the tech industry to utility computing. The idea behind utility computing is that corporations should be able to buy computing power like electricity, with no technical hassles or upfront costs. IBM may be the most aggressive in pursuing the idea. But HP has the early lead in a few niches, such as virtualization technology. "HP is slightly ahead of IBM in this game," says Forrester Research (FORR ) Inc. analyst Frank E. Gillett.

HP also is persuading some companies to pay for computing power with a monthly bill, instead of all at once. Consider Wells' Dairy Inc., a Le Mars (Iowa) ice cream maker. Once, it used two servers to forecast ice cream demand. Now, Wells' is paying HP for computing power on one new server as it needs it. Kim Norby, Wells' vice-president for information systems, says that if the approach works, "it's something we'll take more advantage of."

HP is adding other utility-type features to win over more companies. Later this year, it plans to introduce new technology that lets its biggest customers pool and manage storage resources. And in the coming year, HP will roll out new virtual services that will allow customers to automatically set up a server, instead of manually rigging each machine. Such innovations are what HP needs to persuade corporations to step into its virtual world.

By Ben Elgin in San Mateo, Calif.

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