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An economy of IT

Allocating resources in the computing utility

October 2003

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It's no secret: Computing is moving steadily, if slowly, toward becoming another pay-as-you-go service just like water or natural gas.

The concept of utility computing holds enormous appeal for potential service providers hoping to create the information technology equivalent of the electric industry. Other businesses, too, envision setting up in-house computing "power plants," capable of shifting instantly to adapt to changing demand for computing resources. The vision: Access to extra processing power or storage capacity, or bandwidth will be as easy as turning a tap to fill a tub with water.

Of course, this computing utopia - which is part of what HP calls the "adaptive enterprise," --- must overcome some major hurdles before becoming part of everyday business life. Among the unresolved questions: How do you measure usage? And how do you charge for it?


Creating a computing marketplace

HP Senior Fellow Bernardo Huberman and his team at HP Labs are working toward an answer. It involves what they call computon, which is a unit of measurement for the use of computing resources. (It's pronounced "COMP-uton.")

Essentially, "a computon is a bundle of processing power, storage, and bandwidth that can be sold and consumed," says Huberman, director of HP's Palo Alto-based Information Dynamics Lab. "

Like many other economic entities, a computon's value can change constantly, automatically rising or falling based on factors such as demand for particular applications, types of computing resource, time of day and project priority.

In fact, Huberman says, the price of computons might fluctuate like that of an airline seat, where the price depends on a variety of factors: time of departure, seating class, when it's booked, whether it's a non-stop flight, whether it involves a weekend stay-over. Those factors all work together to set the ultimate ticket price.


Supply and demand set price

That's where the computon fits into HP's Adaptive Enterprise initiative, because it is a pricing mechanism that would adapt to shifts in demand, type of usage and other factors. Huberman's team is examining how the price and availability of computons might behave in a market environment, which is generally governed by the laws of supply and demand.

"Markets are very good at doing several things," Huberman explains. "They allow people to express their preference as to the price they're willing to pay for something. You reveal something about how much it's worth to you."

In addition, following the "invisible hand" of economic theory, markets largely manage themselves, an important asset in highly automated utility computing. "Markets don't require a centralized coordinator to allocate resources," he adds.

Markets also gather and convey information. For instance, a customer who walks into a favorite café and finds that the price for coffee has jumped to $5 per cup might conclude that either there is less coffee being produced in the world today or a lot more people are switching to coffee instead of drinking something else. Or perhaps a combination of both factors. Huberman's team expects to build the same kind of classic supply-and-demand curves for computing resources as the ones created for many other commodities.


An IT auction

One possible market mechanism for allocating computational resources would be to use electronic auctions to distribute available computing resources among users seeking additional power. Many corporate servers run at only 20 percent of their capacity, according to Forrester Research Inc., the Cambridge, Mass.-based technology research firm. In a market for IT, anytime such hardware sat idle, it might automatically solicit bids for the bundles of information processing encapsulated within the notion of computons.

"If no one wants it, its price should be zero," Huberman says. "If a lot of people want it, it should be higher." Currently, his team is researching questions such as how often auctions should be held and how long they should last. [That research evolved from Spawn, a market-based system for allocating unused computing resources among networked computers, which Huberman helped develop while working as a research fellow at the Xerox Palo Alto Research Center in the late 1990s.]

Huberman hopes to have some solid pricing schemes developed by the spring of 2004, and to launch a pilot at HP or a customer company soon after that. The team is also developing an auction mechanism inside a data center that will allocate processing power among underutilized servers.

Creating a new kind of economy is an ambitious goal, and Huberman knows it. "It's not going to be easy, but it's not going to be totally impossible, either," he says.

by Anne Stuart


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Bernardo Huberman,
director of the Information
Dynamics Lab
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