So, where and how do I derive value from a Pay Per Use model?

It’s an interesting question and one that I get asked on a regular basis especially where businesses are very accustomed to CapEx spend and targeting the lowest possible purchase price for new technology.

To look at this we need to take a step back and to look at what the business drivers are for considering a Pay Per use model in the first place. What challenges or issues will Pay Per Use (PPU) help solve for your business? For me, there are three primary areas where PPU delivers real value: Cost, Risk and Time.

PPU is centred around its ability to offer flexibility and agility and these are the cornerstones of the value offered. If you have a fixed requirement, for a fixed period of time, it is likely that PPU isn’t the right approach, and you may be better suited to upfront CapEx spend or a traditional finance product. On the other hand, where there is a need for growth or changes in demand that is often difficult to predict, PPU offers real advantages both in terms of ultimate cost savings as well as risk mitigation.

The basic principle of PPU is that you pay for what you use, which in real terms means you don’t over purchase and make unnecessary investments in unused capacity just in case it could be needed at some point! This lack of over-provisioning immediately delivers cost savings. The removal of upfront payments and the shift to monthly payments helps optimise cashflow and removes the associated cost of money. If we now consider Risk for a moment; there is the risk of over-provisioning and paying for equipment that is never actually utilised (underutilisation) which simply isn’t a factor with PPU, as well as the ability to share or offset risk in a PPU model due to the flexibility offered in terms of scaling up and down in usage. The ability to react to changing circumstances both by increasing as well as reducing usage and associated costs is the key here – how beneficial would that have been to many during the pandemic?

Whilst Cost and Risk are clearly important factors, personally, Time is a game changer in my opinion! The transformational value offered by the dynamic flexibility of PPU presents incredible business value. The ability to reduce the traditional procurement cycle time, from approval through ordering to installation, down from many weeks to days and even hours; utilising the inherent buffer capacity of PPU to immediately offer Proof of Concepts and customer demo’s without the need to find separate kit; the customer satisfaction delivered by on-boarding new customers or additional workloads almost instantaneously; the benefits of having a faster Time to Market to launch new services and bring new revenue streams online.

It’s true to say PPU isn’t right for everyone, but when you look under the hood and start to understand that PPU is so much more than a simple CapEx to OpEx shift, you start to identify the real value on offer and how PPU brings tangible business benefit to many organisations.

If you’d like to explore this subject some more, have your own thoughts or a different perspective I’d love to hear them so please just reach out or join the debate here!?