A new way to pay

Hewlett-Packard Co.’s (HP) new purchasing paradigm for disk arrays may well bring “utility computing” one step closer to reality, but industry observers point out that this novel pricing framework could burn careless customers.

Palo Alto, Calif.-based HP in June introduced a pay-per-use pricing model for its StorageWorks XP 128 and 1024 disk arrays. This system, served through HP Financial Services, would see customers paying for use of the arrays, either as CPE-based devices that the client would take care of itself, a managed service or a hosted service, with the equipment housed with the vendor.

Barry Gregory, Ottawa-based business manager, network storage solutions Canada with HP, said customers only pay for the amount of storage they use.

“The customer doesn’t have to buy anything up front. The customer leases it, and pay-per-use really is that – the customer signing up to an agreement with HP based on the usage of the equipment.”

Alan Freedman, research manager, infrastructure hardware with IDC Canada Ltd. in Toronto, said HP’s unique storage pricing model speaks to “utility computing,” wherein digital power comes as a service. “If you think of people paying for usage like a traditional utility, then…that’s exactly what this is trying to do.”

He warned, however, that companies should use caution when considering the pay-per-use model.

“There are positives and negatives to it. You are paying a premium for this service. There’s a monthly retainer or such as that. You have to make sure it’s going to be cost effective for you.”

According to Anders Lofgren, an analyst at Forrester Research Inc. in Cambridge, Mass., pay-per-use customers would face a “baked-in” premium. The client may well only use half of the available space on an array, but HP has paid for the entire system. That cost of unused space is recouped by HP through its pricing scheme offered to customers, said Lofgren.

However, “The cash outlay is still a whole lot less, because you’re only paying for what you use. Also, you’ll never run into a situation where you’re running out of capacity, because you can always access more. That makes life a whole lot easier.”

Freedman said it’s up to the enterprise to understand its own storage needs before boarding the pay-per-use bandwagon.

“You are going to be able to satisfy demand when the peaks occur, or for seasonality. But you have to make sure you’re not going to pay more than just buying a regular system. Make sure your utilization is going to go down as well.”

Lofgren said some companies might be better off enacting their own pay-per-use scheme internally. Rather than rent space on disk arrays, start with a chassis and add capacity as required. That way the firm would reap the benefits of falling technology prices: each slot would cost less to fill than the last one did.

Still, that speaks to companies with linear storage requirements, he said. With pay-per-use, “the capacity is there when I need it – a just-in-time scenario,” just right for firms with more complicated storage needs.

Gregory from HP said it’s difficult to break out typical pricing for the pay-per-use disk arrays. Too many variables (the array’s size, whether it’s managed or not, provisions in each service level agreement) confound calculation.

However, he did say the pricing model takes into account volatile storage requirements. If a company needed a burst of capacity for a short period of time, for example, the array would foist over the space at no extra cost.

Gregory also said the pay-per-use model on the storage side complements a similar pricing structure for HP servers.

“In many instances, server and storage purchases stay together today. We want to make sure that we’re able to offer that to customers already used to it on the server technology.”

But in the end, HP also recognizes that pay-per-use isn’t for everyone.

“(For) a very static customer, in terms of storage needs, pay-per-use might not be a fit for them,” Gregory said. “A customer that’s got storage growth, which is very common these days, and is not sure how much or how long their growth is going to continue, that’s what pay-per-use is all about.”

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Jim Love, Chief Content Officer, IT World Canada

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