IDC: The Computing Utility Services Model Gives Birth to a New Type of Provider

FRAMINGHAM, MA – JANUARY 29, 2001 – The convergence of the network and IT services industries is showing the first signs of a transformation to a computing utility services model and with it, the emergence of a new type of services provider. According to a new IDC report, the application infrastructure provider (AIP) will become the "engine" in delivering utility-based IT and network services by leveraging an Internet data center infrastructure. It is the AIP that will provide the computing infrastructure from which end users will access applications, content, and storage capacity. The impact of this new service model and the role of the AIP will be felt across many types of service providers including ISPs, NSPs, and traditional IT outsourcing companies.


"The AIP will manage the core infrastructure for customers on an outsourcing, or managed services, basis through a set of service offerings that involve the design, building, and operating of the network and IT systems needed to support the ongoing performance of business and production-level applications," said David Tapper, program manager for IDC’s Networked Infrastructure Management Services research. "Essentially, the AIP will be a vertically integrated service provider that delivers these services across a multiple set of core capabilities involving networks, servers, applications, and storage."

IDC believes success for AIPs in this space will involve meeting a broad set of criteria that range from ensuring customer control of data and integrating "last mile" infrastructure services to ensuring rapid service provisioning as well as customer care and billing. Paramount to success will be ensuring near 100% infrastructure performance.

"The reliance of customers in outsourcing their entire business infrastructure to AIPs will require these service providers to achieve this level of performance. However, this will demand that AIPs have access to best-in-breed technologies and provide a set of product-agnostic service offerings," Tapper said. "For companies with ties to a product, the threat that competing products could deliver better service quality may seriously limit the ability to win customers."

As for delivering services in a utility-based environment, IDC believes this may prove difficult for traditional service vendors. "The intrinsic nature of a utility is providing low-priced services for a high volume of users in a very short period of time. The delivery process of traditional service providers is almost inherently diametrically opposite in nature to this model and will require fundamental shifts in their ability to meet the demands of provisioning for a computing utility environment. As such, conversion to a utility model may not be possible for these players."

As a result, IDC believes one of the many impacts of the AIP service infrastructure may be a shift away from traditional IT service providers.

IDC’s new report eBusiness Application Infrastructure Providers: Market Analysis and Competitor Profiles (IDC #B23609) analyzes the AIP market. The report analyzes the competitor landscape, the impact of providing outsourcing services from an Internet data center, pricing and differentiation strategies, and industry trends — 18 AIP vendors are also profiled. The report ends with actionable recommendations on issues such as branding, positioning, meeting customer needs, and the need to develop unique differentiation.

To purchase this report, contact Jim Nagle at 1-800-343-4952, extension 4549, or at

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world’s leading IT suppliers, IT organizations, ebusiness companies and the financial community. Additional information can be found at

IDC is a division of IDG, the world's leading IT media, research and exposition company.

# # #

All product and company names may be trademarks or registered trademarks of their respective holders.