Flexible consumption model reduces IT expenses and helps investments

Not all workloads are suitable for the cloud, which means that traditional data centers still have a place. But on-premises infrastructure must compete with pay-as-you-go models such as IaaS and SaaS, and vendors such as Dell, Cisco, Lenovo and HPE are promoting a new IT model called "flexible consumption."

While flexible consumption and its specific offerings may vary by vendor, the overall goal is to enable a pay-as-you-go payment model for on-premises hardware and software.

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Flexible consumption basics

At the hardware level, the main idea behind flexible consumption is to reduce the cost of hardware investment by first determining the minimum or baseline capacity and then determining a certain amount of additional capacity to support growth or peak usage.

This can also be positioned as a hybrid cloud, giving users cloud-like access to on-premises hardware while connecting their data center to a public cloud provider. The enterprise would then pay a fixed cost for the baseline capacity and a variable cost for any additional capacity used.

The equipment that needs to be installed here includes: automated tools for monitoring and measuring capacity usage to support billing and service quality purposes. Enterprises can adjust the baseline and additional capacity at any time based on actual usage patterns and adjust billing accordingly. This means that enterprises only need to pay a minimum fixed fee on time and pay additional recurring costs for additional capacity.

Some of the most noteworthy offerings include HPE GreenLake, Dell Flex On Demand, Cisco OpenPay and Lenovo TruScale Infrastructure Services, but vendors may not offer flexible consumption models across their entire hardware portfolio.

In the traditional IT spending model, the enterprise is ultimately responsible for software license management: determining which software tools are appropriate and how many licenses are required. Ignoring licenses can cost the enterprise important functionality, force the enterprise to scramble to add licenses, or even put it at risk of license violations.

Flexible consumption makes software licensing more of a collaborative process and allows enterprises to adjust software needs over time, making it more affordable for enterprises to deploy collective software licensing structures.

All SaaS products follow some form of flexible consumption model and allow businesses to use software without having to install or maintain applications. Businesses do not need to deal with licenses and only pay for the number of accounts or seats or the amount of work performed by the software service. Examples include ServiceNow Now Platform and SAP Concur.

The pros and cons of flexible spending

The most significant benefit of a flexible consumption model is reduced risk. Traditionally, capital-intensive IT investments have been risky for many businesses. There is a lot of money involved, and business leaders must know that the investment will provide the desired results. This level of risk often inhibits the deployment of new and innovative technologies, while exposing companies to different risks such as falling behind or losing competitiveness.

Flexible consumption models can eliminate some of this potential risk and lower financial barriers. Rather than purchasing a set amount of equipment outright, companies can acquire the same amount of equipment, pay for a relatively small amount of capacity, and then use additional resources as needed over a set period of time.

Flexible consumption models can also simplify cost control. In traditional IT procurement, enterprises simply deploy equipment, but a lot of additional work and monitoring is required to determine how business applications use the infrastructure. From an enterprise perspective, flexible consumption models may be more attractive when leaders want technology to provide new or unproven capabilities.

A key element in a vendor’s flexible consumption model is monitoring and metering tools that provide the enterprise with a detailed snapshot of how capacity is being consumed and the drivers behind it. Cost allocation and control is certainly not a new concept, but it is often associated with flexible consumption models.

The most difficult aspect of flexible consumption is changing the mindset of business and IT leaders. Moving from Capex to Opex can be a challenge. Flexible consumption is also disruptive for the enterprise because the way the enterprise views the role of IT fundamentally changes. Erratic, unclear or unpredictable usage patterns can create utilization issues and unexpected bills for this spending model.

Fortunately, the success of technologies such as managed hosting and cloud computing have made consumption-based or pay-as-you-go IT models viable, so it is now much easier to switch to this model.