Flexible consumption models lower IT overhead, help investments

The basics of flexible consumption

The general idea behind flexible consumption at the hardware level is to decrease the cost of that hardware investment. This may be approached by determining some minimal or baseline capacity, along with some amount of additional capacity intended to allow for growth or peak usage.

It also may be positioned as a hybrid cloud play, giving users cloud-like access to on-premises hardware, while connecting the data center to a public cloud provider. The business would then pay a fixed cost for the baseline capacity, along with a variable cost for any additional capacity used.

Installed gear includes automated tools for monitoring and measuring capacity usage for billing and quality of service purposes. Organizations can adjust the baseline and additional capacity over time in response to actual usage patterns, and the billing is adjusted accordingly. Thus, the business commits to some minimum pay-over-time arrangement, with additional recurring costs for added usage.

Some of the most noteworthy offerings include HPE GreenLake, Dell Flex On Demand, Cisco OpenPay and Lenovo TruScale Infrastructure Services, but flexible consumption plans may not be available across a vendor's entire hardware portfolio.

In a traditional IT spending model, the business is ultimately responsible for software license management: deciding which software tools are appropriate and how many licenses it needs. Overlooking licenses could leave the business without important capabilities, forcing it to scramble to add licenses or even risking license breaches.

Flexible consumption makes software licensing more of a collaborative process by allowing the business to discuss software requirements over time and arrive at a collective software licensing structure that is more affordable over time.

All SaaS offerings follow some form of flexible consumption model, and allow businesses to use software without installing or maintaining the application. Without license handling, the business only needs to pay for the number of accounts or seats or the amount of work performed by the software service. Examples include the ServiceNow Now Platform and SAP Concur.

Pros and cons of flexible consumption

The most notable benefit of a flexible consumption model is risk reduction. Traditional, capital-intensive IT investments are risky for many businesses. It's a lot of money on the line, and business leaders must know that the investment will provide the desired outcome. This risk level often inhibits the adoption of new and innovative technologies -- but the business then runs a different risk of falling behind and operating at a competitive disadvantage.

A flexible consumption model serves to erase some of this potential risk and lower the financial barriers. Rather than outright buying a certain quantity of gear, the business acquires the same amount of gear and pays to use a relatively small portion of that capacity over time – then engage additional resources as needed for a set time period.

Flexible consumption also simplifies cost control. In a traditional IT acquisition, the business simply deploys gear, and it then requires significant additional work and monitoring effort to determine how business applications are using the infrastructure. As a business matter, flexible consumption can be far more attractive when leaders intend the technology to provide new or unproven capabilities.

The monitoring and metering tools that are a critical element of a vendors' flexible consumption financing provide businesses a detailed snapshot of exactly how much capacity is being consumed -- and what drives the consumption. Cost distribution and control is certainly not a new idea, but it's generally associated with flexible consumption models.

The most difficult aspect of flexible consumption is changing mindsets of business and IT leaders. Shifting from Capex to Opex can be a challenge. Flexible consumption is also disruptive for businesses because of the fundamental change in the way the business sees the role of IT. And erratic, unclear or unpredictable usage patterns can pose utilization problems and unexpected bills for this spending model.

Fortunately, the success of technologies such as managed colocation and cloud computing have established the viability of consumption-based or pay-as-you-go IT models, so it's much easier to transition to this framework today.