Utility computing companies are facing "life and death" choices as they struggle to adapt in a market sector undergoing seismic changes.

IDC warns that existing suppliers of utility computing must adapt or die as demand shifts away from the large enterprises - which have previously been the main customers of utility IT services - towards SMEs (small- and medium-sized enterprises).

"Companies seeking long-term success in the utility computing market must look past the current market adoption model to what we believe will comprise the heart of the market - the SME," said David Tapper, program manager for IT Outsourcing and Utility Services research at IDC.

"Winning in the SME space will require coordinating a set of widely disparate players, such as telecommunications companies, OEMs, and giant retailers, all of which have access to the SME space."

Tapper warned that there will also be losers among some of the currently dominant IT services firms that fail to adapt with the changing market conditions and are left "out of sight".

The study, Utility Computing Services: The Mid-Market is the "Killer App" But Who Does the Delivery?, warns that the bets established utility companies are placing in the changing market "will be considerable and for some, a matter of life and death".

The analyst firm advises prospective utility players to mitigate risks by playing in more than one IT services camp and, confusingly, to focus on their core competency. It also suggests that developing an "appropriate" investment model and proper brand positioning are crucial factors. ®