Complex Made Simple

The rise of the Pay As You Go Enterprise

The trend is not new; a slow transition from fixed to flexible, from owned to leased. But through the 80's, 90's and the early 'noughties' this was tempered by the value of ownership and desire for direct control. We live in a very different world today. Ownership is no longer as desirable.

By Manu Bonnassie, Regional Sales Director – Central Europe, Middle East and Africa (CEMA) at Brocade Communications

Today it is all about control of expenditure and flexible procurement. Businesses must sustain a level of financial management that allows almost immediate increases and decreases in investment and spend to respond to sudden changes in the wider economic environment. As a result this trend has accelerated; ushering in the advent of the ‘Pay As You Go’ (PAYG) Enterprise.

PAYG in the business sector is all about minimising CAPEX and controlling OPEX: increasing business agility and flexibility, while reducing exposure to depreciation, is the name of the game. Businesses increasingly rent rather than buy commercial space as property values fluctuate, and the proportion of contract workers versus ‘permanent’ workers has increased across Europe over the past few years. Businesses have less commercial reason to own buildings, cars, furniture or people. But this new demand related to the acquisition, access and procurement of resources is different to the traditional lease/termed-contract approaches of the past that predominantly impacted commercial property, employment and office equipment.

Pay as you go IT could revolutionise the workplace

Going far beyond the typical lease hire agreements on photocopiers, printers, laptops and PCs that are already familiar to most, operational IT – the network, the servers, the data centre – is where the PAYG revolution will have most impact. And it is one that could revolutionise how we work, and even our lives, significantly.

Of course, these are the kind of claims that have been made many times before. But there are three things that are driving the advance of the PAYG Enterprise, in addition to the economic environment.

First, is the mobility that underpins the way we live today. Consumer devices are becoming, and in many industries already are, the main means of communications and access to commercial platforms and applications. It may have been driven by the commercialisation of consumer technologies in the beginning, but the benefits of enabling remote working – and remote workers, not requiring office space, chairs, tables, fixed lines, and so on – has been recognised as a profit-driver that offers faster, better customer service, and ensures the business remains competitive. This has tremendous implications for the network and the data centre, where traditionally a company’s information, knowledge and data was held all together, in one place, on company owned servers, secured and managed by company employees.

Now data and commercially sensitive information can reside almost anywhere thanks to this mobilisation of workers. And at the same time ensuring they can still connect to the company systems via wireless rather than wired devices is vital, and requires a level of flexibility and resilience not present in most traditional IT infrastructures.

The rise of the cloud has major impact

This has been one of the drivers of the second change – the rise of ‘cloud’. There is a lot of noise and promotion about ‘the cloud’ and definitions vary, but simply put cloud provides that flexible IT infrastructure, which may be owned, or may be offered by a third party. Cloud also underpins one of the biggest trends in IT right now – adoption of Software as a Service (SaaS). In August 2011, IDC reported that by 2015 SaaS revenues will have grown to $53.6 billion, outpacing traditional software product delivery to account for nearly $1 of every $6 spent on software2. This rise is not surprising. SaaS is a true PAYG solution, an appealing alternative to having to buy, maintain, roll-out and manage multiple licenses and physical discs; to ensuring updates, patches and fixes are deployed and the latest versions applied at a regular rate to ensure applications and hardware remain compatible. More cost-effective, lower total cost of ownership, and predictable and manageable expenditure; to always have access to the latest, up-to-date versions, and flexibility to increase or decrease use as require – what’s not to like?

Questions may remain about data protection, service level agreements, technology compatibility and security, but the business appeal of a PAYG approach will undoubtedly win through.

At the same time the cost of the physical enabling infrastructure – the networks that carry the data, and enable access to the applications – has become unsustainable to some (particularly to small- to medium-sized enterprises). Solutions such as Ethernet fabrics, virtualisation and cloud offer a way of utilising the IT assets already in place far more effectively, but legacy network architectures can’t support such approaches. So businesses are facing a choice; between becoming less competitive, less responsive and less proactive, or cutting back on business development to invest in IT.

The dilemma generated by this scenario has driven the third change – change in procurement of operational IT assets. Now even networking technologies are available on a PAYG basis. Businesses are starting to demand PAYG alternatives to enable them to acquire the networking technologies they want, such as Ethernet fabrics, to create the flexible network infrastructure they need, and response to procurement innovations (such as Brocade’s Network Subscription (BNS) procurement model) strongly reflects this trend. BNS is not a lease option, it has no fixed term – it simply enables businesses to acquire the data centre infrastructure they need on a PAYG basis.

Managing risk is now key to businesses

‘Uncertainty’ is the driver of business strategy and procurement today. Despite the mass of information and broad variety of economic indicators available, the ongoing challenges of the global markets and the impact at the regional and local level in terms of interest rates, inflation, consumer confidence and employment has made this the age of uncertainty. Managing risk has always included consideration of financial fluctuation – but for C-level executives today be they at the helm of multi-nationals with tens of thousands of employees, or a local business with less than 10 staff, this issue is impacting every decision they make. Becoming a PAYG Enterprise, giving up ownership of office space, laptops, staff and networks creates a level of flexibility and fluidity that is truly revolutionary and enables them to react to uncertainty in a controlled, planned and manageable manner.

And this means while physical assets remain critical, how they are acquired is facing a change that will have ramifications far beyond the data centre, the office or ‘work’ as we know it today.