The ability to deal with people is as purchasable a commodity as sugar or coffee and I will pay more for that ability than for any other under the sun. -- John D. Rockefeller
A banker is a fellow who lends his umbrella when the sun is shining and wants it back the minute it begins to rain. -- Mark Twain
Sun's move is more than openly asking $1/cpu-hr. -- they are forcing the commoditization of computing by making a market.
A friend of mine from the RateXchange days (B2B Bandwidth Commodity Exchange) forwarded a press release about a MIPS Exchange fostered by Sun foray into Grid Computing, pointing out the similarity to our old business plan. The Over-The-Counter exchange is hosted by Archipelago, giving it level of neutral positioning and real trading infrastructure. Some short term impact:
- Price transparency begets more transparency
- Price setting shifts negotiation to service level, credit and settlement terms
- Setting a standing offer to sell at a given price is half of the role of a market maker, expect them to offer a price they will buy at as well
- Fostering a Secondary market for your own product pools some customer risk and should increase initial sales
- The creation of a Forward market is where it really gets interesting
IBM is offering cycles at half the price of Sun and HP has a grid barter plan called Tycoon. Jonathan Schwartz challenges IBM for not having a standard offering. When market debate shifts to standards, commoditization is settling in. Analyst Michael Dortch puts it well:
"The ability to acquire compute cycles economically as they are needed is incredibly compelling. However, questions about how requests for those cycles will be prioritized, and whether or not priorities will be governed by service agreements, auctions or other mechanisms are just the beginning for interested IT decision-makers," he added. "The fact that these questions are being raised is good for all concerned, but actual, specific business benefits will have to wait until at least some of these questions are asked -- and answered -- by Sun, its partners and at least some of its competitors."
Jonathan offers this table as a commodity definition:
| Elements | Sun's Grid | IBM's Grid |
| Industry Standard Server | V20Z Opteron (2.4 GHz), V210 SPARC |
? |
| RAM per CPU | 4 Gig | ? |
| Cache storage per CPU | 20 Gig | ? |
| Operating System | Solaris 10 | ? |
| Is OS open source? | Yes | ? |
| Is OS Protected by ALL* corporate patents? | Yes | ? |
| Minimum Commitment | 4 hrs. | ? |
| Price per hour | $1 US | ? |
While this is an admirable stack, and is significant progress in a consistent redefinition of Sun's strategy, it has little to do with the commoditization of computing. How the commodity is produced is irrelevant except as a temporary source of advantage for one actor. What matters is defining price, quantity, quality and delivery mechanisms. What Sun has defined is price and quantity, and now its time to hire some lawyers into the marketing department.
It is in Sun, IBM and HP's interest to come to a common table and pool risk. This will not happen anytime soon, and first there will be alternative definitions and markets. Sun's initial asking price is a ceiling, not a floor or a table. Expect for them to trade in and out of the market leveraging information arbitrage (the real reason you want to be a first mover in commoditization). Watch for when a second seller enters (Google?), an agreement is standardized by early movers, volatility ensues and liquidity explodes.
Gold like the sun, which melts wax, but hardens clay, expands great souls. -- Antoine Rivarol
