-------- Original Message --------
Subject: Your papers on Economics & Grid allocation
Date: Wed, 14 Mar 2001 12:10:20 -0800
From: Lance_Norskog@enron.net
To: rajkumar@csse.monash.edu.au, davida@csse.monash.edu.au,jon@csse.monash.edu.au



Hello-

I am researching mass computation infrastructures.

The company I work for, Enron, is a worldwide commodity company.  Our
business model is to find mid-sized commodity markets that don't work like
large-scale commodity markets (like wheat, gold, orange juice, etc.) and to
restructure them.  The division I work in is working to do this for
long-distance fiber optic bandwidth. Other divisions are pursuing metals,
paper pulp, etc.  (We even have "weather derivatives", which is a betting
parlor for industries that depend far too much on hot or cold weather.
Somehow, this is legal!) So, my perspective on mass computation is from the
point of view of how to make it a large-scale market.

The papers you have published and are presenting concentrate on the
development of a "spot" market for the commodity of processor time.  This
is only part of the economic picture. ( I just found "Calender based" among
your list of bidding parameters, but your analysis seems to be very
oriented to the spot market.)

Our customers are large corporations.  They have a need not to solve some
particular problem now and then, but every day.  For example, take a
department store chain that routes one million different items from
warehouses into department stores every day, and wants to do it in a
near-optimal way.  They need to run this computation, with different input
vectors, every business day!

If that company is to commit to running its business with the Grid, it needs a
few guarantees around its Grid use:
1) complete reliability and availability
2) a known price for every use, set far in advance
3) an active spot market in case its regular supplier fails
4) enforceable contracts guaranteeing quality of service

This last is a killer: the quantity of processing power you get can't be
squishy.  It has to be a measureable unit:  "Java MIPS" is computer-driven.

Number 2, a known price for every use, is also missing from your analysis.  
A large, active, "liquid" commodity market can supply not merely spot
market purchases, but also future needs at a price fixed today: "6 million
MIPS from midnight to 3 AM every day for six months, starting July 1" will
cost me this much per month.  I can lock down my spreadsheet and know that
I won't be driven out of business by a temporary shortage, because my
supply is fully guaranteed.

Large commodity markets have the vast majority of their product change
hands under such long-term agreements, rather than on the spot market.  
The strategy is to buy part of your needs in long-term contracts, part in
medium-term contracts, and most of the rest on short-term, just to avoid
getting stuck with 5 years from now with vast amounts of a commodity you
don't want.  Every day you might have a missing 3-5% that you need to buy
on the spot market.  (I'm in California. We're having so much trouble
because our utilities were banned from buying a heterogeneous basket of
contracts and were required to buy all electricity on the spot market.)

I think my point is that while economics is a fine metaphor for making
operational decisions in scheduling resources, those numbers will not be
visible to end customers. Instead, the customers will buy blocks of
resource for future delivery with pricing based on standard macro-economic
factors like interest rates, falling machine prices, rising electricity
prices, etc. The producers will use your economic-based techniques to
direct their day-to-day operations and to make the inter-producer spot
market function.

Lance Norskog
Sr. Software Engineer
Enron Broadband Systems

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