Hardware by subscription

Brocade's Hardware-as-a-Service model takes modularity into the balance books. The question now is which vendors are likely to follow suit?

28 November 2011 by Penny Jones - DatacenterDynamics

Brocade recently released a monthly subscription model for companies wanting to use its networking infrastructure. It is a model that promises to push the idea of modularity even further, with finance structures that can be moulded as networking demand requires.

It is a clever play by Brocade, which could see first-mover benefit for the vendor. Brocade will still offer traditional models but now the end user can benefit from buying according to need. The overall cost benefit, however, will depend on whether the incremental costs will be considerably lower than the full cost for buy and run.
Rackspace Hosting has trialled the new service. Rackspace Hosting product manager Rob Jackson says that while subscription pricing is widely used with software, this is the first hardware solution he has come across that offers the same scalability.
“The interesting thing is that with hardware providers, especially in the networking space, everything is so modular now. Most products are being built so that you can scale up or down, and add or subtract features and performance. So this is not just an economic model, it matches how they are building the hardware,” Jackson says.
Brocade’s new model is designed to encourage companies to approach data center infrastructure projects in a scalable way, while encouraging end users to take up the latest in technology.
Quocirca analyst Clive Longbottom says he believes while takeup may not be seen immediately, it is a model that users will take to over time.
“The markets will move towards subscription — but I am not 100% sure they are ready for subscription in this market yet,” Longbottom says. “I think a majority [of end users] will go for buying the baseline need and then use the subscription model for their needs above it. It is a gamble for Brocade — it could end up oversupplying the market and not getting any revenues from the oversupplied kit — but I think it will get the model right pretty rapidly, and that such a modular approach will work pretty well.”
Brocade product marketing director Alan Murphy says he believes data center operators, especially those in the hosting or cloud computing space, have been calling for a change to traditional Capex and leasing models for years. “This option allows companies to deploy equipment quickly,” Murphy says. “Historically, equipment in the data center would be overutilized or underutilized, but now equipment can be deployed in line with usage.”
Rackspace’s Jackson says his customers are essentially all about pay-as-you-go. “In the hosting industry you have to be as flexible as possible, whether it is with networking, storage or other areas,” Jackson says.
“From an internal standpoint, this enables Rackspace to benefit more from the supply
chain — we can reduce the risk and keep our costs in check. It really solves a great problem
for us.”
Brocade’s Murphy admits Brocade is taking on the risk of hardware deployment. “We offer the equipment with no lease contract, no term commitments. We can deploy the equipment, we will ship the network equipment to you, and adjust your per-port per-month payment up or down, complimentary to Capex models. Essentially, Brocade is assuming a lot more of the risk in the environment instead of having all the risk sit with the customer.”
Longbottom and Jackson both say companies will need to shift their forecasting models if they want to make use of Brocade’s subscription model.
“What makes this model work is an accurate forecast, regardless whether the volume is high or not,” Jackson says. But the model can allow companies to lower baseline costs.
The latest and greatest
Another defining benefit of Brocade’s new subscription model has to be that new technology can be at a user’s fingertips within a month.
Jackson is the first to admit that the companies hosting in its data centers are always interested in the latest and greatest technologies, especially those where service delivery offers a competitive edge. He says Brocade’s new model ensures Rackspace can keep up with new networking requirements as the technology allows. Murphy says it also means companies can try out products much closer to the release date.
Modularity and scalability are moving from buzzwords to reality. 
This article first appeared in FOCUS 18. To subscribe to FOCUS magazine, click here.




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