Utility computing: How does it differ from real utilities?

For the last two decades, technology companies have dreamed of a day when computing power will be delivered as a utility. But if computing is a utility, will it be regulated like one?

By: Guruswamy Ganesh, Vice President, Corporate Engineering, SanDisk India

Technology companies have been longing for the day when computing power is delivered as a utility, for almost two decades. No IT management headaches, no more software licenses. With public cloud, things change a great deal.

But now another question comes up. If computing is a utility, will it be regulated like a public utility? If yes, the business model of cloud service providers, and everyone that sells technology to them, will inevitably change. Make no mistake: The power industry is a completely different, and in many ways, far more challenging system. Government agencies need to approve major capital upgrades. Profits and pricing are heavily regulated. It also moves far, far slower. If not already obvious, the difference between IT and power is a stark one.

But, luckily, the probability of this happening is slim. Here are a few reasons why:

1. Storage
Electricity is the one major commodity that isn’t regularly stored. Reservoirs hold water. Cold storage units are packed with food. Batteries and other power storage technologies are finally coming to market, but for the most part the electricity powering your lights and heaters is largely generated in real time. India, the 5th largest producer of electricity in the world with demand likely to reach 155 gigawatt (GW) by 2016-17 is a testament to what an amazing feat of engineering the grid truly is.

The stringent standards of service, however, also mean that it is (or was) more practical to give an individual company a legal monopoly. If companies competed for customers, you’d see tangles of wires that go nowhere, resulting from the half-competed remnants of companies that exited the market or went bankrupt. Outages would likely be more frequent because there would be little incentive to invest heavily in backup systems.
By contrast, data storage is an elemental part of data centers. Your files won’t disappear if a fiber optic cable gets cut or a server gets unplugged. Monopolies, and thus regulation, aren’t required.

2. Pricing
There’s nothing free market about power prices. Your state (or country) sets the rates and effectively, the capital budgets and profits of your utility. That might rub you the wrong way if you’re a staunch opponent of government interference in markets, but in a “real” real time network, customers have little real bargaining power.

Imagine if what you’re paying for a kilowatt hour for power hikes nine times. What could you do to avoid being plunged into darkness? Get a solar system? India has added 2,000 megawatts of solar power capacity between January and March, which is equal to the capacity added during the entire 2015, but some people can’t afford it and it will take weeks.  Buy a diesel generator? It’s what people are forced to do in India and a major source of pollution and high power prices. Steal power? It’s the third most stolen commodity in the world.

With the cloud, this extreme form of customer lock-in doesn’t exist. Consumers can switch providers with ease and cloud providers know this. Partly as a result, prices go down over time, not up.

3. Public Support
Utilities often require easements and leases to tracts of municipal land for purification plants, transmission assets and the like. These are big, classic civil engineering projects. The same goes for wireless carriers and TV networks: without access to the wireless spectrum, they likely couldn’t operate.

Cloud providers need easements as well, but it’s a more manageable problem. You can build a cloud without help.

4. Universal Access
Customers in rural areas or poorer communities wouldn’t even be able to get grid connections if regulation didn’t exist, given around 70 percent of India’s total population is still inhabited in rural areas, this is a sizeable chunk. Again, not a problem for the cloud. Google, Box and Dropbox offer free services. You can also get gigabytes worth of fast, reliable storage that plugs directly into laptops and servers.

5. Security
Security for cloud providers means lost credit card numbers or private information leaking into the wild. Security to a utility exec means that too, but also pipeline explosions, chemical leaks and the chaos that erupts with a major blackout. The lack of life-threatening disasters dramatically lowers the need for oversight.

In the end, computing is a utility. But it won’t be treated like one.

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