Pay-Per-Use Hardware: Friend or Foe?

The pay-per-use or pay-as-you-go pricing model is gaining more and more traction in many industries, even in some unexpected ones. It makes perfect sense to pay for cloud storage according to how much of it you use, but this pricing model for physical goods is relatively new.

While the term has been around for a decade now, it has gained more and more traction in recent years. IT vendors are pushing pay-per-use hardware aggressively with interesting value propositions for its use in on-premise data centers, edge locations, or colocation facilities

But is it a wise plan to forgo owning your hardware? Do the cost savings make sense in the long run?

As usual, there is no one-size-fits-all for every business out there. Let’s explore the pros and cons of pay-per-use hardware, so you can make an informed decision for your business.

But first, a quick primer:

What Is Pay-Per-Use Hardware?

Pay-per-use or consumption-based pricing is a model in which the customer pays a fee for usage on demand. In pay-per-use hardware, the customer doesn’t own the hardware (i.e., server, laptop, router, etc.), but they can use it as they want, as long as they pay a fee based on what they use.

In a way, this pricing model is similar to the way copy machine producers started charging their clients years ago. If someone didn’t want to invest in an expensive copy machine, they could simply lease it and pay for every copy they made.

This gave customers more budget flexibility and copy machine producers a steady revenue stream. 

Pay-Per-Use Hardware Pros

The main draw of pay-per-use hardware is that it doesn’t require a big up-front investment. Networking equipment can get very expensive, especially if you want to have access to the newest, most powerful servers.

Another major benefit of this consumption-based model is agility and the ability to scale up and down very fast and, again, without a major investment. In an era of uncertainties, flexibility and the ability to change gears at a moment’s notice are major pluses.

Moreover, you can have access to the newest technology for a fraction of what it may cost to acquire it—at least initially. 

IT vendors have built pay-per-use hardware offers in an effort to compete with cloud providers. With more and more companies flocking to the cloud, consumption-based pricing meant they could have access to better technology without having to sacrifice the regular refresh of the equipment in their data centers.

Even more, some vendors offer “buffer stock.” The term refers to unused equipment that simply sits there waiting for you to need it. When you do need it, all you have to do is turn it on—no more waiting for weeks for purchased equipment to arrive at your data center. 

However, as always, things aren’t black and white. Pay-per-use hardware has its downsides too:

Pay-Per-Use Hardware Cons

Just like with any consumption-based subscription, the costs can add up pretty quickly. While pay-per-use hardware offers some flexibility for companies that aren’t sure of their needs, companies that do know their equipment requirements are usually better off owning the hardware.

Also, keep in mind that moving to equipment you don’t own will turn a capital expense of investing in equipment into an ongoing operating expense. For companies with large IT budgets, this can have major implications on the books. 

The flexibility of leasing can be great, but not all vendors offer such flexibility. Some contracts have minimum payments and long-term commitments. That’s fine if you are absolutely sure that you want to keep using this solution for the binding period. But do keep in mind that this takes away from the much-touted flexibility.

How to Make the Right Choice

If you’re looking to test more types of equipment or technologies, pay-per-use hardware may be the right choice for you. It will allow you to make performance comparisons that can be helpful whether you choose to stay in the same model pricing or switch to buying your own equipment.

Similarly, if you change your equipment often or if you need to scale up or down at a moment’s notice, pay-per-use hardware can be more affordable and faster.

Again, it’s important to read the fine print and the terms of service. The last thing you need is for a clause in your contract to render you equipment-less because you’re in breach of a rule you didn’t even know about or an unexpected balloon in expenses because of a little-known adjustment.

The HDTC colocation facility welcomes hardware that’s owned or leased, so we can help you, as an unbiased consultant, figure out what type of equipment strategy is right for you. Let’s talk!