Avnet Introduces Utility Pricing on Hardware

August 20, 2013 Dan Burger

The capital expense of buying servers and storage has some companies wondering how they can keep up with IT modernization. It’s a question that has Avnet eager to talk about pay-as-you-go solutions. The giant IT distribution company has a program called “Capacity Now” that could be called capacity as a service, if we didn’t already have too many “as a service” offerings to juggle in our lexicon.

This is a payment model that allows Avent’s partners in the reseller channel to go to IBM midrange shops with an infrastructure purchase option on a utility payment plan. Customers get the option of installing the hardware on premise or at a co-location facility.

In other words, the IBM i shop pays for what it uses on a month-to-month basis and has the built in flexibility to accommodate growth that requires additional capacity for CPUs and storage capacity. It’s an operational expense rather than a capital expense, which requires no up-front cash expenditures.

That’s a pretty nice benefit for a lot of companies that are worried about the cost of new hardware. It also beats a lease by establishing a baseline charge for the system sized for current business requirements, as opposed to leasing equipment that is sized for expected growth, which puts companies in the position of buying more capacity than they currently need.

The Capacity Now services agreement is set up with a baseline and a buffer that anticipates increases and that is paid for at the time the increases go into effect. Once the company starts using capacity in the buffer, it pays for what it uses at the end of each month. From that point on, the month-to-month charges can increase or decrease based on usage. It can’t go below the baseline, however, which is the minimal payment and is based on what the customer currently needs.

As long as the company doesn’t exceed the buffer, it can increase and decrease without the disruption of service that comes with adding CPUs or adding storage. An increase in capacity can be done in seconds, rather than minutes or hours or days or weeks.

If a company increases its capacity and looks like it will continue to grow beyond the buffer, a new contract can be negotiated to extend the buffer so that running out of capacity does not occur.

Predicting capacity over two to three year period is a challenge. Certainly, system sizing is critical as the new system has to fit a company’s current and future requirements. Avnet and its partners do that assessment work before a service agreement is made.

This is not a particularly good option if company expects growth to be slow or non-existent, but even in those circumstances storage alone is typically a growth area and a service agreement for storage alone is an option.

One area where Avnet expects the Capacity Now service may blossom is for companies that are considering a PureSystems converged platforms approach to IT. By eliminating the upfront costs of Pure Systems, a company can get into a server and storage consolidation plan with much less financial pain.

Although this article has been discussing Capacity Now in terms of IBM midrange shops, it is platform agnostic and therefore covers the gamut of servers and storage options.

Avnet rolled out this program across all its supplier lines this summer after first offering it in its HP product line.

There are similar options available from suppliers and manufacturers, but I believe they are usually done with leasing and financing, with a capital expense aspect to them. Avnet treats this as a services agreement not a financial agreement. The services side of it consists of metering, monitoring, capacity planning, and monthly billing. It is a term agreement, typically three years, but it could be extended to four or five years.