Definition

capacity on demand (COD)

Capacity on demand (COD) is a purchasing option that allows companies to receive equipment with more computer processing, storage, or other capacity than the company needs at the time of purchase, and have that extra capacity remain unused and unpaid for until the company actually requires it. Vendors are promoting capacity on demand as a cost-effective and time-saving alternative to more traditional methods of upgrading. With COD, a vendor might provide a company with a fully-configured 24-processor computer server but only charge the company for the number of processors they actually use. The vendor provides the additional capacity hoping that when the company expands and needs more capacity, they will not look around elsewhere but will simply take advantage of the extra capacity the vendor had already provided. In this scenario, the company would contact the vendor to have the extra processors activated, and the vendor would bill them accordingly.

Critics of COD compare the service with that of a hotel mini-bar, pointing out that the convenience of "instant gratification" can lead to poor capacity planning and ultimately, higher costs. The Meta Group has estimated that 80% of the world's 2,000 largest companies will provide customers with some kind of COD model by 2006. Leading COD vendors include IBM, Sun Microsystems, and Hewlett-Packard. Storage is currently the leading COD commodity.

This was last updated in March 2010
Posted by: Margaret Rouse

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