A flurry of announcements from hardware vendors points to a change in how enterprises are purchasing servers, storage and networking resources for their data centers and edge deployments.
To entice companies to keep workloads on premises, hardware vendors including Cisco, Dell, HPE, IBM, Lenovo and others are offering consumption-based pricing for data-center infrastructure. These pay-per-use products are designed to shorten procurement cycles, allow customers to scale up or down with demand, and more economically link hardware spending with usage.
HPE, for example, pledged to transform its entire portfolio to pay-per-use and as-a-service offerings by 2022, and last week, the company added to its GreenLake lineup with new data services and infrastructure. Dell, for its part, unveiled the first products in its Apex portfolio of managed storage, servers, and hyperconverged infrastructure.
Pay-per-use hardware models such as these can deliver cloud-like pricing structures and flexible capacity to on-prem environments, and the hardware can be deployed in a company’s own data center, at edge locations or in colocation facilities. The model is generally targeted at enterprises that want alternatives to buying equipment outright for workloads that aren’t a fit for the public cloud.
This approach can help enterprises simplify modernization efforts and preserve capital, says Daniel Newman, principal analyst at Futurum Research.
“With hybrid cloud being the overwhelming approach of the enterprise, it is becoming a catalyst for big IT infrastructure providers to build cloud-like models for prem-based services. It makes sense,” Newman says. “HPE and Lenovo took this path early on with GreenLake and TruScale. Dell has been building Apex for some time and has a massive customer base in key areas like storage and compute to tap into. Cisco is also entering the fray with its Cisco Plus offering.”
The concept of pay-per-use hardware isn’t new, but interest is growing. Research firm IDC reports that 61% of enterprises plan to aggressively shift toward paying for infrastructure on a consumption basis. By 2024, half of data-center infrastructure will be consumed as a service, IDC predicts.
Uptake so far is strongest in storage. In 2024, half of newly deployed storage capacity will be consumed as a service, Gartner anticipates. On the server side, 5.6% of on-premises x86 server spending will be consumed as a service in 2024, Gartner predicts.
Why as-a-service infrastructure?
Part of the appeal of as-a-service infrastructure is that companies are looking for more manageable hardware refreshes, says Tracy Woo, senior analyst at Forrester Research.
“Hardware vendors that traditionally sold a system as a one-off are finding it hard to compete with the cloud providers. Customers don’t want a data center that is difficult to refresh. Public cloud offers the ability to get the latest hardware, with much less upstart costs, and not having to worry about capex budgeting. To stay relevant in the conversation, hardware providers like HPE and Dell need a new way to provide their hardware—hence, GreenLake and Apex,” Woo says.
And there’s plenty of capacity that isn’t destined for the public cloud any time soon, analysts say.
Public cloud has had an enormous impact on enterprise computing, but it still only represents a fraction of total workloads, says Bob O’Donnell, president and chief analyst at TECHnalysis Research. The majority of workloads are still running locally in a data center or in a colocation facility. At the same time, enterprises have come to appreciate many aspects of the public-cloud model. “The flexibility of being able to ramp up as you need capacity, and then ramp down when you don’t, for certain businesses is fantastic,” O’Donnell says. “That business model is appealing in a lot of ways.”
A consumption-based hardware approach can offer the best of both worlds. It combines elements of the public cloud-computing model with the realities of workloads that need to stay local, whether for regulatory reasons or because of the effort and skills required to rearchitect applications for the cloud, for example, O’Donnell says.
The as-a-service approach provides more agility to turn things on or off, or make a left-hand turn, while also allowing enterprises to maintain control over their data and use on-prem infrastructure for their latency-prone workloads, says Patrick Moorhead, president and principal analyst at Moor Insights & Strategy.
“I think the best workloads to consider are those already in the public cloud that don’t require a tremendous amount of ‘burst’ capabilities. Anything that has a lot of data would benefit from going on-prem as this is where the data is generated,” Moorhead says.
Woo agrees. “Good fits are items that are very data-heavy, where the cost of ingress and egress will ramp up quickly and where latency and fast processing are an issue. These are workloads in AI and ML or in high-performance computing,” Woo says. “Other areas these are useful are in remote locations where public cloud coverage isn’t possible, like on an oil rig in the middle of the ocean. For these scenarios, companies will look at these sorts of on-premises solutions.”
Analysts caution, however, that making a switch to this model won’t be without challenges, and estimating usage requirements can be tricky. “This represents a fundamental shift in how IT gets paid for,” O’Donnell says. “The devil’s in the details. Some of [the services] are truly consumption based, and some are actually more subscription based, which is slightly but importantly, different.”
For these reasons, companies won’t rush into the consumption-based model, and there will be a lot of experimentation, O’Donnell says. “Let’s not forget, there have been plenty of horror stories of people who moved to the public cloud, thinking it was going to be great because they only paid for what they needed, and it ended up costing them way more than they expected.”
On the positive side, “We are watching public cloud and on-prem converge quickly to serve the needs of the user – which is an encouraging sign,” Newman says. “I love seeing competition among the providers as it tends to foster innovation and make offerings more competitive.”
New moves in consumption-based pricing
Here’s a summary of the latest pay-per-use servers, storage and networking announcements:
Dell unveiled the first products in its Apex portfolio, which include a storage-as-a-service offering and a bundle of on-premises compute, storage, and networking resources for private and hybrid cloud deployments. A self-service dashboard called Apex Console lets enterprises identify, subscribe to, and monitor the health and performance of Apex services; access usage and spending reports; and refine capacity as business needs change.
HPE last week added to its GreenLake portfolio of on-premises, pay-per-use services. Its new data-services platform consists of three new elements: Data Services Cloud Console, a cloud console that’s designed to streamline storage management, from deployment and provisioning to ongoing maintenance; cloud data services, a suite of software subscription services that automate infrastructure management; and HPE Alletra, a new infrastructure portfolio that’s managed by the Data Services Cloud Console and features the All-NVMe HPE Alletra 9000 and 6000 systems.
Cisco in March advanced its network-as-a-service plans with the debut of Cisco Plus and a commitment to deliver the majority of its portfolio as-a-service over time. The first available solution will be Cisco Plus Hybrid Cloud, which includes the company’s data-center compute, networking, and storage portfolio in addition to third-party software and storage components all controlled by Cisco’s Intersight cloud-management package. The second Cisco Plus service will feature Cisco’s secure access service edge (SASE) components, including its SD-WAN and cloud-based Umbrella security software.
IBM Tailored Fit Pricing for IBM Z
Two years ago, IBM announced a cloud-like pricing model for its mainframe software, a move designed to deliver more flexible, consumption-based pricing for workloads on IBM z/OS. This month, it added a complementary flexible pricing model for its mainframe hardware: Tailored Fit Pricing for IBM Z-Hardware Consumption Solution.
Lenovo in April announced a collaboration with Nutanix to deliver a hosted desktop as-a-service offering. Enterprises can choose from a range of Lenovo client devices, such as thin clients and PCs, along with Citrix and other virtual desktop environments, and ThinkAgile HX Series hyperconverged infrastructure powered by Nutanix. Monthly pricing covers the client devices, data-center systems, and software and services, all managed by Lenovo.
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