Even with hardware prices falling, shopping for a new server is still fraught with issues, not only about what platform and operating system to choose but more importantly how to ensure that your shiny new beast continues to serve the needs of the ever-changing demands made on the IT systems it supports. Today, it seems, part of protecting this investment comes down to how you choose to pay for it.
The choice most IT managers face is should we follow a lease and change or buy and upgrade strategy with our servers. Purchasing outright, even with todays lower hardware prices, can still put a big dent in the IT budget. The longer-term headache is one of how to manage an often fairly new machine that is under-performing as it reaches capacity. And, when the server finally reaches the end of its useful life, there are the relatively new issues of its safe and legal disposal.
Lease and change
If we were to believe the server manufacturers, it would seem that the outright purchase of servers is passé and to be avoided. According to them, leasing is the new and smart way of managing server, and indeed all IT, procurement. IT managers all over the world are being tempted by offers of one easy monthly or quarterly payment.
The arguments from the technology point of view are certainly persuasive if a server stops doing the job then change it for a new bigger shinier one. When it reaches the end of its useful life simply hand it back and the vendor will deal with the messy issues of its safe disposal. Certainly protection against technology obsolescence, and the cost of equipment disposal, are two compelling incentives for leasing among IT managers. The traditional arguments, often dictated by company financial policies searching to reduce costs and manage fluctuating cash flow, of exchanging capital expenditure for a regular monthly payment are still valid. However, smart companies are now adopting a leasing philosophy that allows for a powerful alignment of its finance strategy and IT strategy, using creative leasing arrangements to enhance the output of both departments.
Vendors like leasing arrangements because it gives them a firmer grip on the customer account, locking customers into a vendor strategy that makes it harder to change suppliers. Its an extra way of building loyalty to a hardware platform, operating system or brand in a market where there is very little to distinguish one server box from another. Leasing options, with the customer benefits of technology refresh, standardised payments and easy disposal, offer the hard-pressed salesman another tool to get you to say yes.
A new twist on the lease option is starting to emerge capacity on demand. Server manufacturers such as IBM, HP, Dell, Sun Microsystems, Unisys and Fujitsu-Siemens believe that the future is a pay-as-you-go, on demand model. Their vision is that computing resources will become another service, like water or electricity, that is so reliable that it becomes taken for granted. However, this utopian vision of the computer utility is still some way away.
In the meantime, vendors are introducing their own flavours of capacity on demand. Companies can now have installed a more fully configured system than the budget, or even current IT needs, would allow. Payment is then matched to actual usage of the system, and the extra processors, memory or disks can be 'turned on', and paid for, if required at a later date. With some Unix systems, the process can be even slicker the whole machine capacity is available from day one. Processor usage and intensity is monitored and payment levels match usage levels. A useful option for IT departments that have to manage peaks and troughs of user demands. From the technology perspective, capacity on demand provides an upgrade shortcut, making it easier for IT departments to manage processing, memory, storage and bandwidth capacity.
Capacity on demand server procurement will appeal to companies with inconsistent or unpredictable growth patterns and those that have a policy of avoiding capital expenditure in favour of pay-as-you-go financing terms.
Leasing and capacity on demand may not be a means of actually lowering costs in server procurement, but they do provide a means of managing tight budgets and, more importantly, of delivering a clear capacity strategy either through technology refresh or instant upgrade.
Small Windows and Unix servers will probably still be bought and paid for by hard cash, even though the issues of upgrade and disposal remain. Medium-to-large servers are ideal candidates for leasing, especially if you look for deals with a technology refresh option. For peak and trough usage a capacity-on-demand Unix server could be the best long-term bet.
The bottom line is that choosing a new server should be driven by how best to service the business, not manage the cash flow. The good news is that today, neither of these options is mutually exclusive.