Pay for Outcomes, Not Infrastructure: Consumption-Based Business Models for IT

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Today, you’re in a continual race to master hurdles faster than your competitors. And by “hurdles,” we mean your customer’s ever-changing needs. Forecasting and getting ahead of trends are difficult, especially when life throws a global pandemic in your way.

To stay competitive and agile, many organizations are shifting away from large capital expenditures. Instead, they are leveraging consumption-based business models (CBBMs). CBBMs allow consumers to use products and/or services only as they need. Unlike a subscription-based model with recurring costs (whether you use your allotted capacity or not), a CBBM allows your organization to only acquire the resources it needs. This “pay as you consume” model creates elasticity in terms of budgeting, which creates adaptability for your business in your market.

We talked to Vervint’s Account Executives Brent Sundberg and Dan Frank to learn more about how a CBBM can specifically help IT teams as they navigate increasingly complex demands from across the organization. They each provided tips on how IT can connect with finance to seek alignment and encourage acceptance of the model. But first, buckle up, here is a short overview of CBBMs and the benefits they can provide to your IT team.

A Brief Overview of CBBM

The consumption-based business model is a trend that is here to stay within IT across industries. As the variety of cloud-based software continues to soar, so does the budget that is allocated towards storage.

Consumption-based business models deliver cloud-like experiences for businesses, but with the added benefit of still having tangible infrastructure in your local data center or collocated facility.

Imagine preparing an IT budget for the next three years. How much storage and compute are you going to need three years from now? You may have some idea, but the rapid pace of change both within your organization and in the broader market ultimately means you’re guessing — and your guess is as good as ours. Investing in infrastructure based on a guess is both a waste of time and money.

Instead, switching to a consumption-based business model can open up new opportunities for your IT and finance teams. With a CBBM, you pay for the service of compute and storage, and you only pay for the amount you are consuming.

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The Benefits of Consumption-Based Models Over Capital Expenditures for IT

Historically, companies have either purchased hardware with capital, or leased the hardware for their data center to effectively manage data center costs. This hardware is typically leased for three years and lives on the balance sheet as a capital lease. Often, a portion of these assets sit idle until they are ready (or needed) for future use. The problem is that any unused asset ties up capital that could be used elsewhere to benefit the business.

And in times when a business suddenly requires more capacity (like a period of rapid growth), businesses make large IT purchases to expand their data center and its capabilities. Unfortunately, there is a prolonged waiting period from the time an RFP is created to acquiring, configuring and going live with new product. All the time spent during the procurement cycle is time the business is unable to take advantage of new opportunities or begin new key initiatives.

And what happens if you suddenly don’t need as much capacity as you have purchased?

A CBBM allows your company to move at the speed of your growth. A CBBM is perfectly tailored to your needs. Your organization benefits from cloud-like scaling of services, but your infrastructure is on-prem and you are only paying for what you need. This increased flexibility provides a buffer for your compute and storage expenditures and significantly decreases your risk of over- or under-investing in your data center.

How to Make the Switch to a CBBM for IT Infrastructure

Consumption-based business models can bring benefits across your organization. But transitioning your entire organization to a CBBM is not a task to tackle all at once. The first team to champion this initiative is often IT. They will reap the most immediate benefits from this model.

Of course, bringing about any new, effective change in the business environment isn’t easy. So the first step to implement a new business model is to get all relevant stakeholders and business units on the same page. To transition toward a CBBM, it is especially important to collaborate with your Finance team and start a discussion on moving away from the rigid three-year budgeting model. If your business is rapidly growing, this model is increasingly ineffective when it comes to adapting.

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A consumption-based business model allows for the convenience of cloud coverage with the accessibility and familiarity of on-prem infrastructure. It allows your team to leverage capital in new ways instead of sinking it into unused infrastructure.

Align IT, Business and Finance in New Ways With Vervint

If you want to provide your business with more agility and flexibility to respond to today’s needs, contact us today. We can connect with your team to discuss your goals and operating needs. Based on that conversation, our team will help set parameters for your CBBM that will allow your organization to flex up and down to increase adaptability and other capabilities.

About the Author

Anna Ramirez

Author Title

Anna Ramirez is a Marketing Specialist at Vervint and a graduate of Grand Valley State University. She brings vast marketing experience through her previous internships and undergrad work. She is passionate about continuous, lifelong learning and looks forward to empowering her curiosity through both personal and work-related experiences.