In recent years, storage pricing models have undergone a significant shift. To give customers more choice, vendors have introduced cloud-like, pay-as-you-go models as alternatives to their tried-and-true, CapEx-focused upfront purchase plans. These new models give on-premises customers that seek a little extra flexibility another option if they’re not comfortable going all-in on public cloud.
But there’s still room for progress. Business uncertainties brought about by the COVID-19 pandemic and the resulting financial crisis have pushed enterprises to reevaluate infrastructure needs, and storage needs in particular, on a regular basis. All costs are suddenly up for review. Five-year planning is shot. Some short-term initiatives are being accelerated; for others, everything is uncertain.
Customers are looking for more agility, more flexibility and more choice in how they handle their storage needs. Rather than commit to one model – CapEx or OpEx – why not have the ability to mix both? Let the circumstances drive the CapEx vs. OpEx decision for each individual project or workload. Rather than create a bunch of on-prem storage silos – short-term, long-term, high-cost, low-cost – why not create a pricing model that blends some of the advantages of each?
To respond to this unprecedented period of disruption, storage customers can benefit from a new pricing model based on elasticity. They can make the same choices they used to make – purchasing capacity for the long term at a low cost, or renting short-term “burst capacity” for high-use periods. But using what’s known as “elastic pricing,” they can dynamically switch from one arrangement to another without having to pay a premium or a penalty and without having to physically move any data. This gives customers access to capacity as they need it, and eliminates the risk of making a long-term commitment to satisfy short-term storage needs.
Combining new and old models
Some companies who have a low cost of capital will stick to the traditional CapEx model – getting the lowest overall TCO by paying up front for long-term storage. For example, companies in the energy, utilities and telecommunications sectors carefully plan out long-term purchases and depreciate assets over time – and tend to have robust procurement organizations that are used to essentially continual vendor negotiations which are required with traditional storage lifecycles. Locking in low-cost storage for predictable initiatives can drive savings and sustain profit margins.
But these sectors are the exception. In today’s competitive business climate, most companies need to focus on more than just the long-term bottom line. They have to weigh the costs of missing an opportunity against the actual cost savings they may generate by locking in long-term.
Picture this scenario. You’re a vice president of infrastructure at a retail chain, and the leader of one of the business lines talks excitedly about an initiative that could generate big sales later in the year. It’s a data-rich project requiring 100TB, and they want to start next week. Could you spin up enough storage to get the project started?
If all your infrastructure is in the public cloud, and you’re using automation tools effectively, then you may be able to. But you’d pay a hefty cost premium for this elasticity. And if you’re on premises, you’d have trouble accommodating the request. You might be able to rent short-term burst capacity, if your vendor offers it. But more likely you’d have to scout around for a shipment of new hardware, which could take weeks or months to arrive – especially if logistics are constrained due to global challenges. And that may also require an emergency procurement cycle with finance. Oh, you didn’t cover this project that didn’t exist in your annual CapEx budget earlier this year?
This all gets easier with an elastic pricing model. You could immediately start using capacity to accommodate the project’s three-month duration, knowing that there are no shipments required and you will receive a monthly OpEx bill at a pre-negotiated price. If the project ends, you can dial down the OpEx, just like in public clouds. Or if the need is still there in the longer term, and you didn’t want to continue the OpEx payments, you could later “buy out” that capacity with a lump-sum CapEx payment. Either way, you’ve responded to the business line need, allowing them to capitalize on their opportunity.
Here are a few other scenarios where companies could benefit from having an elastic pricing model.
DevOps tests for ephemeral (temporary) environments: These projects pop up quickly and unpredictably, both in terms of capacity and duration. They could require hundreds of terabytes for hours or for weeks – but then they’re done. Organizations get a strategic advantage by being able to pay on a CapEx basis for predictable workloads, burst up short-term storage to cover the testing period, and then drop back down to the baseline. By the way, efficient storage snapshot technology can further simplify this scenario, regardless of business model.
Data recovery: Sometimes you need to recover an old backup of a database temporarily – for example, due to an external audit – and that recovery process requires more capacity than you have available at the moment. Paying CapEx for that capacity for the sake of a temporary recovery makes little sense, but bursting up for a day, getting your recovery done, and scaling back down in seconds does.
New app developments: Sometimes development groups get started on a project and don’t know what kinds of storage requirements they will have down the line. The app might be tremendously popular, and storage needs will grow dramatically. But if the trend passes, you don’t want to be stuck with a lot of fully paid but unused capacity at the end of the hype cycle.
Key considerations for pricing
As you’re weighing your storage needs and determining how to structure your pricing plan, here are some issues to consider:
- Understand your organization’s cost preference: where does OpEx make sense, and where does CapEx make more sense?
- Calculate the hidden costs your organization pays today for flexibility by considering the following factors:
- Check your estate for unused storage, and calculate how much you are pre-paying for extra capacity just to be able to provision quickly – across all your silos.
- What is your lead time for getting new capacity from your vendors, and is it firmly guaranteed even in times of crisis? That’s the minimal amount of time for which you need to keep unused capacity on hand.
- Check your past capacity plans: by how much did you usually miss the projections?
- Understand what guarantees your vendor is offering, including the remedies. High-level marketing documents may differ from real contracts. Be sure to look closely from both business and technical perspectives at commitments like availability, future system upgrades, and maintenance costs.
- Is your storage vendor willing to provision hardware ahead of you actually using it? Does the vendor have a software architecture that can leverage unpaid hardware for performance, resiliency, or other values before you pay for the corresponding capacity?
- Understand the minimum commitments up front and the future commitments of tomorrow.
- Understand your growth. Will you need to add new capacity steadily over time, or will there be frequent spikes in the process?
Looking ahead: The future is elastic
IT leaders today face a dilemma. They are being pushed to move quickly, to spin up storage resources with little to no notice and keep costs at or under budget. Something has to give. They need flexibility, not only in their choice of storage environments but in their choice of how to pay for what they need. New, flexible models like elastic pricing will help IT deliver on businesses’ demands without breaking the bank.
By Eran Brown, CTO for EMEA at INFINIDAT