Flexible Consumption Options for On-Premises IT Are Gaining in Popularity but Won’t Replace Traditional Approaches

C. Drake

Summary Bullets:

  • Flexible solutions for consuming on-premises IT, including pay-per-use business models, vendor-managed private clouds, and flexible financing, continue to attract new customers and providers.
  • Although they will complement, rather than replace, traditional approaches, portfolio expansion, new channel incentives, and efforts to target new markets will all fuel future growth.

Recent months have seen growing interest and investment in more flexible consumption solutions for on-premises IT, including pay-per-use offerings, vendor-managed private clouds, and flexible financing for on-premises IT investments. IT vendors ranging from HPE, Dell EMC, and Lenovo to IBM, Cisco, and NetApp are all looking to tap into what they see as growing enterprise demand for more flexible ways of consuming on-premises IT. Public cloud providers, including AWS, Microsoft, Oracle, and Alibaba, are also honing in on this emerging need for more adaptable IT delivery and contracting models with managed (or easy-to-manage) on-premises versions of their platforms.

The growing demand for more flexible ways to consume on-premises IT is being driven partly by the widespread popularity of the public cloud as an elastic and often more cost-effective way of delivering and accessing IT resources. At the same time, many enterprises need to maintain at least some of their IT resources on premises, within their own data centers – rather than relying on public cloud providers for those resources.

Alongside these drivers are various perceived benefits of malleable on-premises IT consumption. These include reduced upfront costs, the avoidance of overprovisioning, elastic provisioning, and improved consumption-to-cost alignment.

Several factors suggest that flexible consumption offerings for on-premises IT will continue to attract new customers and generate growing revenue for vendors and service providers. These include the tendency among providers to offer pay-per-use options for a growing share of their overall solutions portfolio. Despite this, most providers acknowledge that flexible consumption offerings for on-premises IT will complement, rather than replace, traditional approaches to delivering and managing on-premises environments. There are also things that could contribute to weaker than expected growth for pay-per-use on-premises IT, including the risk that solution portfolios will be poorly organized and communicated to potential markets, as well as factors that encourage enterprises to favor a CapEx approach for particular solutions over an OpEx model.

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