Everybody pretty much needs to be an e-business this year, but it sure is expensive to create a click-and-mortar organization. Low interest rates and flexible financing have been great for traditional IT expenditures every couple of years, but given the unpredictable nature of Internet and intranet workloads, it can be very expensive to come up short on processing, memory, or disk capacity in the middle of a lease, regardless of the generous terms (compared to past decades, that is) that are available from IBM Global Financing and other financial institutions. That is why midrange server vendors Hewlett-Packard and Sun Microsystems have begun offering new capacity upgrade alternatives. These two companies hope to not only help companies make the transition to e-business a little less painful for their customers, but also create loyalty between themselves and their customers and make some extra dough in the process. IBM is not yet on the same page as Sun and HP when it comes to capacity on demand, but IBM will probably make moves in this area if its competition starts winning away business by using it. Odds are IBM will start with its UNIX-based RS/6000s, which compete directly with HP and Sun servers, but the Server Group tends to want to offer marketing and technologies across IBM’s entire server line whenever possible, so that means the AS/400 could eventually have capacity-on-demand offerings.

So just what is capacity on demand? Both Sun Microsystems and Hewlett-Packard have announced special marketing programs that allow customers to buy very big multiprocessor servers today but pay only for the relatively few processors they initially activate and then pay for the processors they activate as their workloads grow. The idea is to give fast-growing Internet startups lots of horsepower in a single frame, perhaps dozens of very fast RISC processors. Having capacity available on demand is vital to these businesses because they cannot dedicate a lot of money to information technology during the startup phase. Sun and HP have set up their capacity-on-demand offerings so customers can dial over the Internet and reach Sun’s or HP’s order processing systems and activate the latent processors in their machines in real time. No taking the machine down for the weekend, no restarting the operating system and applications. Click, click, click and the deal is done, and the iron is there to support a spike in online traffic or order processing or whatever.

Of course, capacity on demand doesn’t solve every problem. It isn’t so much fluid capacity on a rental basis—this could become available in future years because it is a great

marketing attack, kind of like turning your company into its own application service provider—as it is instant upgrading without the usual hassles. Customers cannot downgrade a machine that has been upgraded under a capacity-on-demand agreement, but given the nature of Internet startups, they probably won’t have to unless they go out of business or change platforms, and in either case, it hardly matters that you can’t partially downgrade the server. Capacity on demand is not free, either. Sun is charging a hefty premium on the purchase price of the 400 MHz UltraSparc-II engines that it offers under the capacity-on-demand program for its Ultra Enterprise 10000 "Starfire" servers. To help pay for the administration of the capacity-on-demand program and to make a little extra money on the service, Sun was initially charging almost twice as much for engines in the capacity-on-demand setups as it was for regular processor upgrades. But when HP jumped in the game last month, it charged a modest couple hundred bucks per processor per month for customers who want to use it on its L class and N class midrange servers and V class mainframe servers. HP also set up its capacity-on-demand program so customers paid the then-current price when they upgraded, not the price they paid when they first installed their machines. Sun’s program charges customers the original prices they negotiated at the beginning of the deal, even if it has cut prices since then. Sun does, however, let customers keep that spare server capacity around for as long as they want without charging monthly for it. Most companies will probably find that HP’s scheme is more economically appealing, and Sun will undoubtedly react to it and mirror it.

AS/400 Capacity on Demand Not in Demand—Yet

What’s not clear at this point is what IBM will do to offer capacity on demand to AS/400 customers. The AS/400 Division’s general manager, Tom Jarosh, says that AS/400 shops haven’t been asking for capacity on demand and therefore his organization is not offering it. But if users start employing the AS/400 to support e-business workloads, as Jarosh and other IBMers hope, it might be necessary to offer capacity on demand to AS/400 shops that would rather not do a traditional hardware upgrade every couple of months. Oddly enough, IBM probably has enough experience in tuning the Commercial Processing Workload (CPW) ratings for the AS/400 line (which it uses to slow down processors for certain workloads and to flesh out the product line) that it could even create capacity on demand for low-end single- or dual-processor AS/400s as well as for its high-end Northstar and I-Star servers. And if the AS/400 becomes a popular application service provider (ASP) platform, as Jarosh and his team hope, capacity on demand may be something they have to offer, because ASP workloads, like e-business workloads, are unpredictable and therefore a nightmare to do capacity planning for. With capacity on demand, capacity planning is greatly simplified, and if IBM gives the AS/400 line the same flexible-capacity capabilities as high-end UNIX servers, the AS/400 has a better chance of holding or increasing its presence as a midrange platform.

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