Blade Servers II

• Blades At the sharp end
• The leasing question
• The next wave of blades
• Will virtualisation hurt hardware sales?

The leasing question

One way customers can make advanced technologies more affordable is to lease hardware over a set period rather than buying it outright. The idea is that a set monthly or quarterly fee is more manageable than an upfront bill for hundreds of thousands of dollars. At the end of the lease, the customer upgrades to new hardware and the old kit is taken away.

Andrew Charles is national channel manager for HP Financial Services and increased blade adoption is definitely on his agenda. He spends some of his time out in the field with resellers listening to financial controllers, CFOs and managing directors within their customer base baulk at the idea of upgrades when hardware is still sitting on the balance sheet. Not surprisingly, he is trying to change that mindset and convince these customers that leasing is the answer.

"My experience is that companies up to 500 seats want to own everything but technology is changing rapidly. What's the point of sticking it on the balance sheet when we can keep the business up-to-speed and ahead of the competition?" he asked.

"Even hardware that is more than three years old still has some residual value so we can rip it out and get an extra year and a half out of it in an overseas market to free up whatever book value is left in it and roll that into a new environment for the customer. For a reseller, the pay-off is that more equipment is delivered on day one and at the end of the three-year term you have a financial footprint with the customer. "

The biggest reason for resistance among many customers, according to e-Volve Corporate Technology CEO, David Simpson, is a belief they will get longer out of equipment by owning it.

"They get quite emotionally attached to some of this technology and they hope to get four, five or even six years out of it rather then the financial term of three years," he said. "Obviously that [leasing period] can be extended but perception and historical processes definitely come into play."

Perhaps these suspicions are justified. Why wouldn't a business get five years out of a server if it has only been running at 10 per cent of capacity to perform a single task? Whether a client pays for technology using capital or via leasing is merely a financial decision, Ethan Group strategic sales manager, Antony Flutey, said, based simply on whether they have the cash flow at the time of purchase and whether they could put that cash flow to any better use.

In an attempt to dangle a carrot, HP Financial Services has put together a 'pay-as-you-grow' blade strategy where organisations can have a fully populated blade enclosure delivered and pay for it over time with finance structured to zero per cent over three years.

"We want to help get this technology into the market and in three years time get rid of it," HP's Charles said. "It's a whole asset lifecycle process and more companies are starting to buy into that because asset disposal is becoming a real issue in Australia. Every week, 50,000 computers get put into storage. That's a shocking statistic and there are more than 50 million old computers now in storage across the country.

"I have a number of government accounts I deal with in Canberra and regularly get taken into warehouses that are wall-to-wall with machines built more than 10 years ago. They are full of heavy metals like cadmium, mercury and all sorts of stuff that needs to be disposed of in an environmentally friendly way. Also, they weren't as skilled in getting rid of information from a hard disk back then so a lot of these machines are sitting there with classified information on them."

The idea of transitioning customers to a utility model is an attractive one for e-Volve's Simpson, but the occasional horror story still makes the market nervous. A senior HP executive recently told him of a government department that had bought 4000 servers three years ago and was yet to deploy 1500 of them. Those machines were still sitting in boxes and gathering dust.

"We would prefer all clients to use technology as a utility, so we are very finance focused, but the issues clients often have when financing technology come when they're running refreshes," he said. "They often extend for longer periods because the interruption to business during refresh rollouts is significant, particularly for IT."