Avnet's CapacityNow Brings Utility Computing to HP VARs

Avnet Technology Solutions today launched a new utility computing solution called CapacityNow that enables end users to pay for their individual usage of Hewlett-Packard blade servers and storage products in a recurring revenue model.

Solution providers install the hardware at a customer's site, or at an off-premise location, and the end users pay a monthly charge while Avnet tracks the utilization to determine if the customer needs more or less computing power.

"We're pretty excited about it. In the confusing world of cloud computing, this is a middle ground allows resellers looking how to do business in a traditional manner for them to solve utility usage for the end user," said Tony Vottima, senior vice president and general manager of Avnet Technology Solutions' HP Solutions Group.

Under the program, announced at the HP Discovery conference in Las Vegas, VARs get paid up front as if it were a traditional hardware sale while Avnet directly bills the end user for their compute capacity used each month.

"The nice thing about the program is the reseller sells it as a complete plan and their compensation plan [to sales reps] does not adjust. If you're selling [competing] hardware-as-a-service, utility computing solutions, you have to figure out how to pay a sales rep over three years based on the profit of the transaction at the time," Vottima said.

CapacityNow was developed with HP's guidance and gives VARs a simple method to let end users acquire hardware via a utility service compared to a traditional capital equipment expenditure, Vottima said.

"Avnet pays attention to their utilization and bill them on what they use. We include the hardware they need plus a buffer. If they go into the buffer, we work with the partner to go back in and have a planning meeting to talk to the customer about adding capacity based on their current utilization," Vottima said. "It allows the end user to not have to over purchase and only pay for what they are consuming."

Avnet estimates that end users can save between 25 percent and 40 percent of the cost of equipment over a three-year period. In addition, VARs should make at least the same margin if not additional margin through CapacityNow on the same products, Vottima said. "End users today are trying to determine if they should go into the cloud or stay on premise. This a unique solution that fits right in the middle. It lets them acquire hardware as if they were going into the cloud but they can have the hardware on premise or off premise and in a very private, very secure way pay for it monthly.

"Resellers like it because their sales reps today struggle with quotas to make and how they will get paid [in a recurring revenue model]. To the reseller partner it looks like a hardware transaction. We handle all the monthly billing and the reseller gets credit for the sale at the time the asset is deployed," Vottima said.

Next: HP Only (For Now)

CapacityNow is the brainchild of Vottima, who runs Avnet's HP group, so it is only available to HP VARs right now. Depending on its success, the program could be expanded to include other vendors and to HP products beyond servers and storage, Vottima said.

"We haven't had any connections or talks with other vendors. It's something I wanted to introduce to HP to drive more 3Par and blade solutions, especially in vertical markets," he said. "You look in government markets and there are a number of opportunities [for compute as a service]. In health care there's the ability to reduce costs and gain compute power too. We saw it as a great fit and HP really warmed up to the idea."

Avnet has trained sales resources who can help VARs explain the benefits of CapacityNow to end users, Vottima said. "They can go in very uniquely positioned vs. a capital asset buy," he said.