HP Launches Usage-Based Pricing For Leased Servers

Hewlett-Packard last week launched the industry's first usage-based utility pricing program, a move designed to help new Superdome and NetServer customers align IT costs with IT usage. Under the pay-per-use pricing plan, HP will charge customers based on the actual server processing capacity used during a monthly billing period.

Pay-per-use billing applies to customers that lease new 32-way or 64-way Unix-based Superdome or Intel-based NetServer servers through HP's financing services. Under the program, HP remotely monitors HP server, operating system, and software utilization, then bills customers based on the average of peaks and valleys in usage over a given month. Third-party software running on HP servers isn't covered under the program; customers buy and use those applications the same way they always have.

HP is targeting companies whose need for processing power varies significantly during the year. Some retailers, for example, do most of their business during the holiday season and need to double or triple their computer processing capacity to handle the load.

Pay-per-use isn't designed for companies that run their servers at full speed most of the time. A customer enrolled in the pay-per-use program that ran its server at maximum year-round would end up paying 17% more than under a flat-rate lease. HP says a customer "has to make a judgment on what their capacity needs will be and choose the appropriate pricing plan." HP won't say how many customers lease servers via its financing units, but it does say that about 60% of its customers lease servers through HP, a reseller, or some other arrangement.

Compaq, HP, IBM, Sun Microsystems, and other hardware providers offer capacity-on-demand programs, says Gartner VP and research director Ed Cowger, but those programs don't let customers shut off capacity once it's been activated. He expects the new pricing model to appeal to about 5% of HP's customers for new products.

"Good planners always have more capacity than they need," says Jim Pierce, director of business systems development for Anixter Inc., a $3.8 billion Skokie, Ill., wiring and cabling manufacturer, "so there could be a benefit to paying on a utilization curve."