HP Tries Toll Plan for SMBs

HP's brought pay-per-use pricing to its low-end SANs

February 6, 2004

2 Min Read
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Hewlett-Packard Co. (NYSE: HPQ)is bringing its SAN pay-per-use concept from the enterprise into the small and medium business (SMB) market, in a move that throws the payment model into question.

What's pay-per-use? It has nothing to do with those old pay toilets that are now outlawed. And no, you don't have to drop a quarter into the desktop every time you want to access your database.

Pay-per-use is a leasing plan that lets customers pay a fixed monthly rate plus a variable fee based on actual usage. If a business with HP gear uses less storage than usual in a given month, it pays less for licensing the equipment. If storage use spikes, the customer pays more, in the form of a one-time fee.

Theoretically, the company saves by not having to shell out quite as much in monthly payments as they would if leasing the SAN gear without the plan. If needed, though, the entire system is at the company's disposal for the full fee.

HP has offered pay-per-use pricing for its high-end XP enterprise SANs since June (see HP Services Stay Self Centered). Competitors IBM Corp. (NYSE: IBM) and Sun Microsystems Inc. (Nasdaq: SUNW) offer similar plans for their high-end gear. Now HP is making pay-per-use available on its Enterprise Virtual Array (EVA) systems for SMBs and small enterprises.As it does with its high-end gear, HP uses metering technology in the EVAs to track how much storage customers use.

While it fits HP's strategy of bringing SANs to SMBs, at least one analyst thinks this might be one idea best left in the enterprise. Smaller companies usually have more predictable storage needs and will benefit less from pay-per-use.

"Theres always a segment of the customer base that finds this attractive," says analyst Arun Taneja, of The Taneja Group. "At the low end it doesn’t make much sense, though. At the high end it makes sense, but as you come down the line... there aren’t as many variables."

The pay-per-use model may not fit all enterprises, either. While the feature may be an attractive alternative for companies that occasionally use more storage than planned, businesses with consistently growing storage needs might find themselves spending more each month.

"If you’re constantly growing, pay-per-use might not be right for you," concedes HP server marketing director Vish Mulchand.Ultimately, HP's strategy is to attract customers with relatively fixed needs who might foresee an occasional demand for more storage. Human nature may work to advantage as well: Having the capacity available might tempt the weak-willed into using more storage than they ever intended. [Ed. note: Like restaurants where they give you the whole bottle of wine, but tell you they charge by the drink.]

"The vendor assumes if the capacity is there," Taneja says, "there’s a greater chance you’ll use it." And, of course, pay for it.

— Dave Raffo, Senior Editor, Byte and Switch

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