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Friday, May 28, 2004

Electricity, Gas -- and Computing via Bweek

Enginering giant Fluor uses "utility computing" for a leaner and more flexible operation, paying only for the tech resources it needs.Over the last three years, Fluor Corp has wrung waste from its information-technology budget like water from a wet sponge.The company is reaping the dividends of its decision to bet on a new trend called utility computing. Instead of buying its own hardware and software, it purchases just what it needs and no more from suppliers such as IBM and Cisco.While such outsourcing arrangements have been around since the '80s, utility computing is something new. Fluor has a contract with minimal fixed costs. It pays for what it needs the way it pays for water, electricity, gas, and other utilities. About 25% of its IT costs are fixed, down from 95% a few years ago.Utility computing is starting to take off. The market is expected to triple over the next three years, to $25 billion, up from $8.6 billion in 2003, according to Gartner Group. Market penetration will rise to 30% of companies, up from 15% now, the research and consulting outfit saysSaving money isn't the only benefit of utility computing. It also lays a foundation for more efficient business operations. Fluor recently established a data center in Chile to serve pharmaceutical and oil-refining clients. Suppliers IBM and Cisco set up the center in 70 hours, a process that would have taken three months if Fluor had bought all the equipment and done the installation itself. That sort of speed gives Fluor an edge in the market, improving its ability to respond to opportunities. Within 18 months tech outfits will start selling something that IBM refers to as grid computing. That will allow big companies such as Fluor to share, select, and aggregate dispersed clusters of computing resources, boosting efficiency and lowering costs even more.

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