HP banks on the utility
of a computon
October 13, 2003
BY MICHAEL KRAUSS
What’s
a computon? (Sounds like something that might harm Superman. No
… wait … that’s Kryptonite.)
Computon is the name of a new unit of computing power that Palo
Alto, Calif.-based Hewlett-Packard hopes will change the way companies
buy and use technology. The idea is to sell computing power on
demand, just like electric utilities sell kilowatt-hours of power.
Last spring, Nicholas G. Carr, editor-at-large for <it>Harvard
Business Review<mn>, may have indirectly given a boost to
the computon and utility computing when he published a stunning
article titled, “IT Doesn’t Matter.”
Carr’s article has technology company marketing executives
squirming in their chairs. Traditionally, technology companies
sold hardware, software and services to support their customers.
The name of the game was to sell as many mainframes, servers or
PCs; as many software site licenses; and as many hours of high-priced
consulting services as the market would bear.
The implicit promise from all this investment was simple: Technology
will ultimately give you a leg up on the other guy. The sales
subtext was always: If you don’t buy from me, I’ll
take my technology down the road and sell it to your competitor.
He’ll get the competitive advantage. For years this has
been the marketing mantra of the IT industry.
Because of Carr, this mantra may soon be dead, and a whole new
era of technology marketing may be on the horizon. The gist of
Carr’s article is this: Information technology is rapidly
becoming an infrastructure technology, not a strategic weapon.
Businesses around the world spend more than $2 trillion annually
on information technology. That’s probably too much. Managers
would be wise to “manage costs and risks with a frugal hand,”
he reports.
“When a resource becomes essential to competition but inconsequential
to strategy,” Carr says, “the risks it creates become
more important than the advantages it provides. Think of electricity.
Today, no company builds its business strategy around its electricity
usage, but even a brief lapse in supply can be devastating.”
While Carr’s writings are controversial and hotly debated
among technology thought leaders, companies appear to be aligning
with his thinking. Why should multiple companies in an industry
invest in comparable information technology processing capacity?
Isn’t it redundant? Couldn’t an outside provider manage
these services for multiple companies with less waste?
Consider Cincinnati-based marketing giant Procter & Gamble
Co. Last May, P&G announced that it hired HP to manage its
information technology infrastructure over a 10-year period for
a fee of $3 billion. P&G’s intent is to use information
technology as a utility similar to the way it procures power or
water for its plants.
“Utility computing is something we’ve been pushing
inside of HP for many years,” says Nick van der Zweep, director
of utility computing for HP’s enterprise systems group.
Van der Zweep, who helps guide the business efforts around utility
computing adds, “It’s a cornerstone piece of our adaptive
enterprise initiative.
“Utility computing actually goes back 20 years inside of
HP,” van der Zweep says. “Joel Birnbaum (now a technical
adviser to HP CEO Carly Fiorini and previously chief scientist
and director of HP’s research labs) came up with the idea.
“Joel foresaw a time when you would be able to plug into
the wall. Get your capacity. Pay for as much as you were using.
It would all be shared capacity. You wouldn’t have to think
about what kind of computer you used. All computers and storage
would be connected on a global grid,” van der Zweep says.
So what’s HP doing to market its utility approach? In addition
to popularizing new terms and language to describe the world of
utility computing, HP is striving to be collaborative and transparent.
HP is using an expensive case history approach. They’re
running a $400 million global advertising campaign, according
to van der Zweep. “You’ve probably seen ads with various
customers where we show the customer plus HP. We show what we’re
doing for DreamWorks and various other customers. The ads illustrate
how we’re delivering this adaptability and utility-based
computing approach.
“Our philosophy differs from the competition in this space,”
van der Zweep says. “We focus on showing technology as our
customer’s friend. IBM is out there talking about on-demand,
but they put fear into the customers. They say it’s complex.
You need pixie dust. You need binoculars to see the future. Technology
is a complex thing. Come to us and we’ll take care of everything
for you.
“HP is embracing technology and showing our customers that
technology can work to enable the adaptive enterprise and to enable
utility computing,” van der Zweep explains. “Take
the P&G deal. We went to the customer and showed them how
we would do it. We showed them our utility data center. We made
the technology easier to understand.
“With the P&G opportunity HP said, ‘We’re
operating as a utility. When your Web farm needs more resources,
we’ll put more resources in.’ Then we showed them
the technology that allows us to move it from their financial
systems to their Web retail systems and back again,” he
adds.
HP is also attempting to overcome one of the major dissatisfactions
of business customers, the surprisingly high cost of incremental
service. HP is striving to provide clear pricing for an incremental
unit of technology computing. “The price is built into the
contract, and we’ll show you how we do it,” van der
Zweep says.
Personally, I think there’s a lot more to the computon and
utility computing than meets the eye. While most technology users
may not sense it, there’s a dramatic and seismic shift going
on behind the scenes in the way businesses procure technology.
Carr’s article may have the same impact on the information
technology industry as the explosion of the planet Krypton did
in the old Superman comics. For those who understand that the
ground is shifting and prepare for the future the way Superman’s
father did, their progeny may have superpowers.
In other words, van der Zweep and HP just might wind up on top
in the competitive world of selling technology.
Michael
Krauss is a partner with Marion Consulting Partners and can be
reached at Michael.Krauss@Marionpartners.com
or news@ama.org.
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