Sun Starts CPU Cycle Exchange with Archipelago

by Timothy Prickett Morgan

In keeping with the company's desire to create a future grid-based, utility computing infrastructure, and to change the way of thinking about how IT products are sold and consumed, Sun Microsystems has partnered with electronic stock exchange Archipelago Holdings to begin the creation of an exchange for trading CPU processing cycles.

The announcement last week with Archipelago was hinted at by Sun President and COO Jonathan Schwartz at the company's announcement blitz on Tuesday, where it announced the Sun Grid. With this product, Sun is selling CPU cycles at the cost of $1 per CPU per hour and storage for $1 per GB per month on systems that it is burning in before it ships them to customers for their own use (see "Sun Aspires to Be the General Electric of the Grid Era"). Sun says that it can break even on the Sun Grid with only 35 percent utilization, and can make a decent margin at 55 percent utilization, which would be more than three or four times the average utilization of a typical server out there in the data centers of the world.

The exchange that Sun is proposing takes the grid architecture and utility pricing one step further, making prices fluctuate based on supply and demand, rather than fixing the prices as Sun does with the Sun Grid. Moreover, customers will be able to take their excess capacity in their own data centers and make it available (using Sun's software stack, of course) to other customers who want to buy and sell CPU cycles and storage on the open market. Because Archipelago already has the code and expertise in established stock exchanges, it is not hard to imagine there eventually being a futures market in CPU cycles and storage.

According to Robert Youngjohns, executive vice president of strategic development and the guy in charge of Sun Financing, this exchange is in the very early stages. He says that Archipelago was looking at how it might set up exchanges for things other than financial instruments, and Sun was looking for a means to sell CPU cycles and storage and, more important, to establish a standard element of computing that can be bought and sold the world over. (Or, standard elements, since not all computing hours are created equal.) Sun is thinking about offering other utility-style pricing on desktop computers as well as for developers, but it is being vague about what these offerings might be. (The first could be a thin-client solution where you pay to access a back-end grid of virtual PCs running Linux and Sun's Java Desktop System for a per-day or per-month fee, like most of us acquire e-mail and Web access for our homes. It may even include Web access from a major carrier. The latter might be slices of servers for compiling applications and a beefed up version of the desktop so developers can code and test over the wire instead of on local machines.)

When asked about the specter of the governmental bodies, such as the Securities and Exchange Commission or the Commodity Futures Trading Commission in the United States (and similar bodies in governments around the world), that wanted to poke their noses into what Sun and Archipelago are trying to do, Youngjohns said that the two companies are convinced that such an exchange would not need regulation. That remains to be seen.

Right now Sun and Archipelago are working on creating a standard definition of a unit of computing power and coming up with the basic mechanism for buying and selling capacity on the Sun Grid. This should take about three to five months. Youngjohns says that only prequalified buyers will be able to buy capacity the grid, so it will resemble the stock market in that there has to be one or more intermediaries between the seller of a CPU hour and the consumer of that processing capacity. Over time Sun and Archipelago will allow other grids to interconnect and trade on the CPU exchange so they can sell capacity, and eventually the exchange will be upgraded to offer the buying and the selling of capacity in a true open market. From there, other companies will, in Youngjohns' telling of Sun's vision, be able to buy and sell futures contracts for CPU capacity.

The question I have about such and exchange is, will CPU pricing ride down the Moore's Law curve, cutting itself in half every 18 months or so, or will it reach a steady state because the unit of computing power is standardized? The reason why Moore's Law drives price/performance is that customers will only buy capacity, as embodied in a server they acquire and amortize over time, when that server's bang for the buck is so great that they can justify the expense of paying for it now, when they kinda need it, rather than waiting for some point in the future when they desperately need it. Moore's Law makes server pricing more or less predictable; it's always cheaper in the future. But what happens when you need server capacity today and so does everyone else? Or when everyone needs to run big jobs during the holiday season? The price of computing will not necessarily follow Moore's Law under a utility model, particularly if, as Enron so aptly demonstrated, grid operators get stingy with capacity at just the right times.