New financing models target IT’s acquisition challenges

Analyst opinion

The availability of funding – or rather, the lack of it – is a significant challenge for most IT departments, most of the time. Given the clear restrictions this puts on the acquisition of core IT infrastructure systems in particular, why have financing options not had a bigger take-up?

There are many possible answers to this. Top of the list is the fact that, beyond simple lease offerings, few options were widely available until recently. It is probably fair to say too that such contracts rarely delivered a lifetime cost as low as simply buying the kit.

But when economies are under pressure, the funding shortage often pushes organisations to seek new ways of paying for IT solutions. Indeed, the past decade has seen the Cloud industry frequently position its basic pay-as-you-use business model as an economic saviour.

Choice is the key factor

“Businesses want to move IT spend away from capital budgets and switch to revenue expenditure,” is the marketing justification. And over the years we have run many surveys that show organisations do want to use revenue budgets – but not to the exclusion of capital spending. As ever, most organisations want choice.  

At the same time, research projects also indicate that few enterprises want to push all of their IT to the public cloud. Once again they want choice. Sure, they like the flexibility that public cloud offers, for example in the ability to quickly switch IT resources on and off, and only pay for what they use, but they want to be able to do that with systems running in their own data centres.

This would remove one of the longstanding pains arising from traditional onsite capital IT acquisitions. This is where the equipment is purchased upfront on the basis of a ‘best-guess’ of how it will need to scale, plus some extra capacity added on for safety’s sake, with the result in many projects expensive IT kit ends up being under-used.

I have long suggested that the major IT vendors could use their financial resources to offer new delivery models that help here, and over the last year or so this has finally borne fruit. Among others, HPE has taken great steps forward with its GreenLake offerings, enabling it to put IT resources in the data centres of its customers that they pay for as they would for elastic infrastructure-as-a-service from the public cloud: per VM, per month. You can turn resources on and off at will, and as with the public cloud, it’s a managed service where HPE looks after the equipment and the base OS.

It will be interesting to see how quickly and how broadly the take-up of this model will grow. Certainly, HPE says its GreenLake solutions have already experienced rapid acceptance. There is every possibility that this growth will increase as the company expands its offerings and – crucially – starts to make them available through channel partners. Most significantly, HPE will add solutions explicitly designed and scaled for the mid-market, a huge constituency where sensible IT financing has been in short supply.

Originally published on Freeform Dynamics’ Computer Weekly Blog – Write Side Up