CAPEX or OPEX? The effect of hybrid cloud on storage infrastructure pricing

By | 2 minute read | November 4, 2019

This is part six in a 6-part series on storage for hybrid cloud.

  • In Part 1 I set the stage — getting us all on the same page with the terminology of hybrid cloud.
  • In Part 2 we explored what’s behind this rapid industry shift toward hybrid cloud infrastructure.
  • In Part 3 we took a look at how IT organizations are approaching their journey to hybrid cloud and the unique storage challenges that are emerging.
  • In Part 4 we began exploring some best-practice guidance for navigating the change — starting first with modernizing the storage infrastructure you already have.
  • In Part 5 we looked at some innovation ideas geared toward storage for hybrid cloud.
  • In this final Part 6, we’re going to look at the effect hybrid cloud has had on pricing for storage infrastructure.

The dominant pricing approach today for on-premises storage is CAPEX. But that is changing. The economics of cloud consumption-based pricing is influencing on-premises purchases. According to IDC[1], “A perfect utility-based model would be the equivalent of how consumers view their electric or heating service provider — you pay only for what you use, with monthly or quarterly billing that offers guaranteed service levels and predetermined pricing.”

Of course, many of today’s clouds do not meet that standard. In addition to charging for the amount of capacity consumed, cloud storage providers also include charges for the number of accesses (commands like PUT, GET, COPY, SELECT, POST, LIST, etc.) and for amount of data transferred out of the cloud, referred to as “egress.”

Even so, it is the overall economic benefit of a variable OPEX pricing model seen in cloud that Forrester says[2] has its clients “demanding cloud-like consumption models for [the] storage that remains on-premises, with a plea for billing storage usage as a granular GB-per-month OPEX cost rather than a CAPEX charge”.

IDC suggests that by as early as next year, consumption-based procurement in data centers will have eclipsed traditional procurement accounting for as much as 40 percent of enterprises’ IT infrastructure spending[3]. The necessary automation and metering are already being delivered by vendors. Perhaps equally important will be homework on the part of your accounting, sourcing and procurement teams to fully understand the considerations and possibilities. It is certainly something to be watching closely and to be pressing your suppliers on.

Okay, in this 6-part series, I’ve done my best to help you understand what is driving this rapid industry shift to hybrid cloud and how it affects your storage infrastructure. What do you think? What opportunities do you see to help your organization be better positioned to take advantage of the possibilities and better compete in the future? Click the social links below to continue the conversation.

[1] IDC, June 2018, On-Premise Consumption-Based Computing, Doc # US43966018

[2] Forrester, October 2018: Embrace Cloud Economics For On-Premises Enterprise Storage; Business Case: The Infrastructure Transformation Playbook

[3] IDC, October 2017, IDC FutureScape: Worldwide Datacenter 2018 Predictions, Doc # US43152417