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HCI updates bring cloud-style pricing to the on-premises data center

Enterprise IT teams can now buy data center hardware based on just what they use, rather than receive the one big bill that has long been a cornerstone of on-prem purchases.

LAS VEGAS -- The pay-as-you-use model that is familiar in cloud computing has made its way into the on-premises data center as part of hyper-converged infrastructure pricing, with new options from Dell EMC and Nutanix.

Dell EMC has added pay-as-you-go pricing to its VxRail and XC Series hyper-converged infrastructure (HCI) products, and it plans to later add it to VxRack and Enterprise Hybrid Cloud. Cloud Flex, which will be available to customers in the next few weeks, requires no upfront payment and includes payments that decrease over time, said David Goulden, president and chief commercial officer at Dell EMC.

"If you don't like it after 12 months, you stop paying and return it to us ... it is as simple as that," Goulden said at the Dell EMC World conference here this week.

A similar pricing model, Flex on Demand, was quietly introduced six months ago for Dell EMC storage and backup customers, and already, there are about 25 customers that buy storage that way, said Erick Brown, senior director of OpenScale Payment Solutions at Dell Financial Services.

Remi Sabourin, enterprise architect at DMT Development Systems Group Inc. in Winnipeg, Man., which provides lead generation to the automotive industry, doesn't currently use HCI in his data center, but he sees Cloud Flex pricing as a good way to test an HCI deployment. "If it doesn't work out, you could return it," Sabourin said

Customers may think they are saving money when the bills are smaller, said AP Muruganantham, web infrastructure and DevOps lead at Synopsys Inc., a maker of electronic design tools in Mountain View, Calif. There are certain situations where he would prefer to pay hardware costs as an operational expense versus as a capital expense, depending on the number of servers used and how long workloads are run per day.

"If you run 24/7, it may not be as useful," Muruganantham said.

Meanwhile, Nutanix has introduced a similar price structure called Go, which lets customers buy Nutanix as an operating expense for as little as six months. After that, just as in Dell EMC's model, the hardware can be returned or renewed.

Nutanix will continue to recommend that customers buy hardware if they know their IT capacity requirements for the next two to three years or more -- but some IT pros struggle with long-term decisions without knowing future capacity, said Greg Smith, senior director of product and technical marketing at Nutanix, based in San Jose, Calif.

"That is ultimately our goal, to provide a similar experience to any public cloud environment," Smith said.

Hardware vs. data ownership

But with the allure of more flexible pricing for HCI comes questions around the ownership of the data and the hardware.

IT shops must consider that with Cloud Flex pricing, Dell EMC still owns the hardware even if it resides in an enterprise's on-premises data center. Muruganantham compared the model to a home mortgage, where until the loan is paid off, the bank still owns the family home. But he wondered who owned the data once it is on the hardware.

Dell EMC retains the title to the hardware and, ultimately, the hardware could be repossessed for nonpayment. The customer could be handled similar to a leasing customer, which means Dell EMC works with the customer at first to resume making payments, Brown said.

However, the company doesn't anticipate any problems with how a customer might retain data in such a case. Companies often keep paying even in bankruptcy to retain control over the data and work out a plan to either change to new hardware or migrate the data, he said.

We are likely to see this pricing model affect every area of on-prem IT.
Zeus Kerravalafounder and principal analyst, ZK Research

Even though Dell EMC still owns the hardware under Cloud Flex, enterprises apply their own data security protocols, measures and governance, which is one of the benefits of dedicated, on-premises infrastructure.

That makes it preferable to the public cloud for Mona Singh, senior systems administrator at CareFirst, a medical insurance provider in Owings Mills, Md. He does not own any HCI and still relies mostly on a three-tier architecture that uses hardware made by Hewlett Packard Enterprise.

"For us, security is the No. 1 thing," he said -- because the data technically belongs not to the company, but to their customers, and he would have to prove any hardware selection is secure.

Bringing cloud models on premises

Dell EMC and Nutanix likely were forced into these new offerings by Amazon Web Services and other public cloud providers. If hardware vendors don't offer something similar to cloud vendors' utility-style payments, it appears not to be competitive, said Zeus Kerravala, analyst at ZK Research in Westminster, Mass.

"We are likely to see this pricing model affect every area of on-prem IT," he said. "The economics are pretty compelling for many companies."

Robert Gates covers data centers, data center strategies, server technologies, converged and hyper-converged infrastructure and open source operating systems for SearchDataCenter. Follow him on Twitter @RBGatesTT or email him at [email protected].

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