Pay-per-use hardware models such as HPE GreenLake and Dell Apex are designed to deliver cloud-like pricing structures and flexible capacity to on-premises data centers. And interest is growing as enterprises look for alternatives to buying equipment outright for workloads that aren\u2019t a fit for public-cloud environments.\nThe concept of pay-per-use hardware has been around for more than a decade, but the buzz around it is growing, said Daniel Bowers, a former senior research director at Gartner. \u201cThere\u2019s been a resurgence of interest in this for about four years, driven a lot by HPE and its GreenLake program.\u201d\nHPE has pledged to transform its entire portfolio to pay-per-use and as-a-service offerings by 2022. Additional programs include Apex from Dell, which earlier this year unveiled the first products in its portfolio of managed storage, servers, and hyperconverged infrastructure; Cisco Plus network-as-a-service (NaaS) from Cisco, which plans to deliver the majority of its portfolio as a service over time; Lenovo TruScale Infrastructure Services; and NetApp\u2019s Keystone Flex Subscription storage-as-a-service offering.\n\nLearn more about pay-per-use hardware:\n\nIT vendors push on-prem, pay-per-use hardware\nNaaS is the future, but it\u2019s got challenges\nDell delivers lineup of on-prem, pay-per-use hardware\nCisco takes its first steps toward network-as-a-service\nIBM moves toward consumption-based mainframe pricing\n\n\nWith pay-per-use models such as these, hardware can be deployed in a company\u2019s own\u00a0data center, at edge locations or in\u00a0colocation facilities.\nOn the adoption front, uptake so far is strongest in storage. Gartner predicts that in 2024, half of newly deployed storage capacity will be consumed as a service. On the server side, 5.6% of on-premises x86 server spending will be consumed as a service in 2024.\nBut the model isn\u2019t without its challenges, and here are five factors to consider.\nThe hardware might cost more\nIt\u2019s a misconception that consumption-based models let companies acquire the same hardware at a lower lifetime cost than an outright purchase, Bowers said. \u201cToo many people think of this as just a way to get cheaper hardware, that somehow they can game the system. And so they\u2019re excited. But it\u2019s not that. So don\u2019t waste your time.\u201d\nIn reality, a pay-per-use model is generally more expensive than buying the gear outright, particularly if an enterprise knows how much capacity it needs. If an enterprise knows it needs 100 servers for the next three years, for example, it would be less expensive to buy those servers outright.\nFlexible capacity means operational agility\nThe appeal of consumption-based pricing is in aligning infrastructure costs with usage. The programs are designed to allow enterprises to easily scale resources up and down, and they shift the risk of overprovisioning to the vendor. The value comes from gaining operational agility.\nA consumption-based model also can significantly streamline the procurement cycle. \u201cVendors give you what they call buffer stock. You\u2019ve got extra equipment sitting there unused\u2014dark equipment ready to go. When you need something, you just turn it on,\u201d Bowers said. \u201cSo instead of waiting a week, two weeks, three months to order new equipment and bring it in, it\u2019s already sitting there in your facility ready to go. You just power it on.\u201d\nGotchas: Term commitments and minimum payments\nMost programs today aren\u2019t strictly pay-per-use, Bowers said. They combine fixed payments with some variable elements based on a measurement of utilization. Actual pay-per-use would imply that a customer would owe nothing if no resources were used in a particular month.\n\u201cThese programs almost always involve a long-term commitment, like three or four years. They always involve some minimum payment level, which is substantial,\u201d he said. \u201cIt\u2019s not like you can scale this stuff down to zero and pay nothing one month.\u201d\nPricing: Financial smarts required\nWhen enterprise IT teams get a quote for consumption-based infrastructure, many will find themselves in unfamiliar territory, having never evaluated this kind of pricing scheme.\n\u201cIt\u2019s easy for HP or Dell to come in and say how much they\u2019re going to charge you per core, but then you realize you have no idea whether that price is fair. That\u2019s not how you calculate things in your own facilities, and it\u2019s apples to oranges versus public cloud costs,\u201d Bowers said. \u201cAs soon as enterprises are given a quote, they tend to go into spreadsheet hell for three months, trying to figure out whether that quote is fair. So it can take three, four, five months to negotiate a first deal.\u201d\nEnterprises struggle to evaluate consumption-based proposals, and they lack confidence in their usage forecasts, Bowers said. \u201cIt takes a lot of financial acumen to adopt one of these programs.\u201d\nExperience can help. \u201cThe companies that make the most confident decisions are those that did a lot of leasing in the past. Not because this is a lease, but because those companies have the mental muscles to be able to evaluate the financial aspects of time, value, variable payments, and risks of payment spreads,\u201d Bowers said.\nThe big difference between a program like HPE GreenLake or Dell Apex and leasing is that costs fluctuate month to month, depending on how much you\u2019re using, with a consumption-based model. Leasing is strictly a finance program, and capacity doesn\u2019t change in a typical leasing program.\nExperience in the public cloud, which also involves variable expenses, can help, too. \u201cSimply going from an annual budget to, \u2018I don\u2019t know how much I\u2019m going to spend\u2019 is a big shift. So having some cloud usage helps,\u201d Bowers said.\nAt the same time, consumption-based pricing requires some of the same cost governance that public cloud requires so that an enterprise doesn\u2019t get blindsided by unchecked spending. \u201cYou have to put cost controls on it to make sure that you don\u2019t just turn on the faucets and let people spew resources wildly\u2014exactly the controls you put on public-cloud usage,\u201d Bowers said.\nIn general, enterprise companies that are well suited to evaluating a consumption-based model for infrastructure are those with large, centralized IT groups that are accustomed to doing project or department chargebacks for IT services. \u201cEnterprises of that size and scale have done it well. Internally they kind of act like a mini service provider themselves,\u201d Bowers said, \u201cso they\u2019re familiar with trying to align their costs.\u201d\nThe model for data centers is young\nWorkloads that are being considered for a consumption-based model are typically workloads that already exist on-premises and can\u2019t be moved to the public cloud for latency or data sovereignty reasons. That doesn\u2019t mean it\u2019s a small market, however. \u201cThere\u2019s tons of stuff that can\u2019t go in the cloud, so this isn\u2019t just a tiny sliver of the world,\u201d Bowers said.\nThe dramatic 30% to 40% growth in public cloud spending, compared to a flat market for new storage and servers, can make it seem like spending for on-premises infrastructure is declining. But it\u2019s not, Bowers said. \u201cA misperception that a lot of end users have is that cloud is going up and on-premises is going down. Actually, people are buying just as much stuff on-premises\u2014servers and storage\u2014now as they used to.\u201d\nIn the market for consumption-based infrastructure, the area that so far is gaining the most traction is storage. One reason is that storage is easier to price and understand. \u201cUnder these programs, a vendor is essentially giving you a vending machine that spits out terabytes of storage. You press the button. You understand what you\u2019re getting,\u201d Bowers said. \u201cIt\u2019s easy to price, it\u2019s easy to understand, it\u2019s easy to adopt.\u201d\nServer metrics are more challenging. Vendors might charge per node, per core, per GB of memory, or per virtual machine, for example.\nMost nascent is the market for consumption-based networking gear in the data center.\n\u201cThe problem with consumption-based pricing for data-center networking is people haven\u2019t figured out what metric to charge for networking,\u201d Bowers said. \u201cDo we charge by the megabyte transferred, or do we charge by the number of the ports that we deploy? Or the number of switches we deploy?\u201d\nAs the players work through how to charge for network-as-a-service options, the broader market for consumption-based pricing models continues to grow at a healthy clip. Adoption rates are running at about 30% growth, year over year.