Evolving business models and IT strategies are quickly changing the way businesses consume and pay for their data storage. The adoption of hybrid cloud has spurred growing demand for consumption-based IT as an alternative to traditional cash purchases and leases.

In response, many vendors are offering flexible consumption or “pay-per-use” pricing models and subscriptions that bring cloud-like economics to the data center and hybrid cloud. “By 2024, Gartner predicts that over half of newly deployed enterprise storage capacity will be sold as-a-service or on a subscription basis, up from less than 15% in 2020¹.”

With so many deployment types and IT consumption models suddenly available, it can be difficult to know which one is right for your storage strategy. In this blog post, we’ll outline the main types so that you can make an informed investment decision.

Here’s what we’ll cover:

• What is consumption-based pricing?
• Types of deployment and IT consumption models for storage
• Benefits of a flexible consumption model for storage
• What IBM offers
• Next steps

What is consumption-based pricing?

Consumption-based pricing refers to products and services with usage-based billing, meaning you pay only for the capacity you need as you consume it. These models can help you save money by replacing high upfront capital expenses with predictable quarterly charges aligned directly with your changing business needs. The idea is that you can quickly scale by consuming storage capacity instantly, provisioning the resources up or down as needed. Many variations exist, and most programs have a minimum term and/or capacity requirement. 

Types of deployment and IT consumption models

Many vendors today offer choices in storage consumption models and financing. Having this flexibility of choice will help you to modernize and scale your workloads for future business needs. Common deployment and IT consumption models for storage include:

• Traditional purchase model. Most organizations continue to keep select workloads on premises to meet security, compliance and performance requirements. On-premises infrastructure, such as storage, has traditionally been an upfront or leased capital expense in which you purchase infrastructure that is deployed in your data center and will meet your maximum capacity requirements. But budgeting for on-premises infrastructure can be tricky — needs can be difficult to predict, and because procurement cycles for new storage systems can be lengthy, most organizations overprovision their on-premises storage.
• Consumption-based (“pay-per-use”) model for on-premises storage. In these models the vendor provides you with storage systems as defined by your requirements with 25% to 200% (level varies greatly by vendor) more “growth” capacity than your immediate needs. You buy, lease or rent a committed level of “base capacity” that equates to your immediate needs, and you then pay for what you use, when you use it, above that level. These models allow you to scale capacity use up or down as your business needs dictate. They usually have terms from 3 to 5 years.
• Subscription-based, or Storage as a Service. Like the consumption-based model above, these models have base commitments and pay-for-use above the base commitment level. The big difference is that Storage as a Service (STaaS) is a service offering much like cloud-based services. STaaS provides fast, on-demand capacity in your data center. You pay only for what you use, and the vendor takes care of the lifecycle management (deployment, maintenance, growth, refresh and disposal). The offering will be based on a set of service level descriptions indicating things such as levels of performance and availability with no direct tie to specific technology models and configuration details. The infrastructure still physically resides in your data center, or in a co-location center, but you don’t own it, install it, or maintain it. In addition, you don’t have to worry about procurement cycles for adding capacity or technology refreshes. You gain cloud economics with an OPEX pricing model, combined with the security of on-premises storage and lower management overhead.
• Cloud-only approach. Cloud services are readily scalable and can be easily adjusted to meet changing workload demands. Deploying in the public cloud can reduce spending on hardware and on-premises infrastructure because it is also a pay-per-use model. In the perfect utility-based model, you would pay only for what you use, with guaranteed service levels, set pricing and predictable quarterly charges aligned directly with your business needs. Of course, many of today’s clouds do not meet that standard. In addition to charging for the amount of capacity consumed, some cloud storage providers also include charges for the number of accesses and for amount of data transferred out of the cloud, referred to as “egress.”
• Hybrid approach. A hybrid approach to storage would integrate a mix of services from public cloud, private cloud and on-premises infrastructure, with orchestration, management and application portability delivered across all three using software-defined management. It can also include consumption-based pricing and subscription-based services for on-premises storage.

Benefits of a flexible consumption model for storage

Now that you know the common types of deployment and IT consumption models, let’s explore a few reasons why consumption-based models are increasingly popular. Benefits of consumption-based pricing for storage include:

• Cloud economics – move from CAPEX to OPEX. In a time of shrinking IT budgets, consumption-based pricing allows you to reduce capital spending with predictable monthly OPEX charges, and you pay only for what you use.
• Align IT resources and usage. With monitoring included, you’ll be able to understand and more accurately predict your capacity usage for more cost-efficient operations. This means no more overprovisioning or running out of capacity, and instead, you can align spending more closely to the needs of the business.
• Gain agility. With consumption-based IT you have extra capacity to provision almost instantly to meet changing business needs. No more delays due to long procurement and vendor price negotiation cycles. You get a cloud-like experience.
• Reduce IT complexity. The vendor assumes storage life-cycle management responsibilities, which means your admin staff can focus on higher value tasks. And with consistent data services on-premises and in the cloud, you can improve availability and avoid costly downtime, all while reducing overhead.
• Access to the latest innovations in technology. As-a-service models give organizations access to leading storage technology with enterprise-class features for superior performance, high availability and scalability.

What IBM offers

Here are a few examples of consumption-based pricing models from IBM Storage, as well as offerings for traditional deployments and hybrid models:

Consumption-based pricing with IBM Storage as a Service and IBM Storage Utility

• IBM Storage as a Service: A flexible consumption model that provides consistent data services enabled for both your on-premises and hybrid cloud infrastructure needs. IBM Storage as a Service is powered by the enterprise-class capabilities of IBM FlashSystem® and comes with a base level of capacity to meet your current needs plus 50% additional capacity pre-installed and an option for guaranteed 100% availability. Plan for your storage needs from day one and pay only for what you use at a single rate with transparent pricing, no hidden penalties and billing designed for OPEX* treatment. Unlike most other vendors who charge a premium for on-demand or growth capacity usage, IBM charges base and growth capacity at the same price. In addition, while most other vendors charge a premium for data that does not compress well, IBM uniquely charges on usable (physical) capacity, so you gain any benefits of data compression with no penalty rates for non-compressible data. This offering includes full lifecycle management by IBM (installation, maintenance, physical growth, technology refresh, retirement and recycling of old equipment).
• IBM Storage Utility: This flexible storage subscription provides a procurement choice with usage-based billing, so you pay only for the capacity you consume on the storage you choose. IBM calculates and deploys the capacity needed for growth on Day 1 (up to 200% over your base needs), avoiding the need for incremental updates. You can select the storage that best fits your needs and quickly scale by provisioning/consuming additional capacity near instantly. Usage can scale up or down as requirements dictate. IBM Storage Insights provides AI-driven, cloud-based monitoring to help accurately predict and control capacity needs without disrupting the business. Like IBM STaaS, no premiums are charged on growth capacity or data that does not compress well.

Flexible pricing for traditional on-premises storage with IBM Global Financing: Simplifies your hybrid cloud storage with a flexible financial plan that aligns to your IT and business strategy. You’ll find flexible financing options to reduce your upfront payments and optimize cash flow with payment options for IBM servers and storage solutions.

Hybrid approach — extend IBM Storage as a service to the cloud with IBM Spectrum Virtualize™ for Public Cloud: IBM Spectrum Virtualize for Public Cloud makes it possible to work with on-premises software to replicate or migrate data from any of over 500 supported storage systems so you can add hybrid cloud capability without major new investment. Pay for only the storage capacity you manage on the public cloud, with flexible software monthly pricing available.

See all flexible consumption and pricing models for IBM IT infrastructure >

* Subject to customer accounting practices

Next steps

If you want to learn more about flexible consumption models for storage and how this model could benefit your operations, here are a few next steps you can take:

• Register for our on-demand webcast. Learn how IBM Storage can help boost your storage environment with security and flexibility. Speakers include IBM VP of Storage Product Marketing Scott Baker and IBM VP of Storage Offering Management Sam Werner.
• Take the IBM IT consumption assessment. Our 10-question assessment can help you evaluate whether you’re an ideal candidate for consumption-based pricing for on-premises storage.
• Talk to an expert. Fill out this form to schedule a consult with our storage experts or call sales at +1 877-426-4264 (Priority code: Storage).