Buy or rent?

It’s the age-old question, when should you buy and when should you rent an asset? Applied to IT, should I purchase hardware and build services or rent an infrastructure service?

And because it’s age-old, there’s plenty of guidance available on the subject.

So, what are the things that you need to consider?

  • Can you accurately forecast demand?
  • How much IT hardware do you need now, and in 3, 4 or 5 years?
  • Will demand for IT hardware be constant?
  • Do you have easy access to capital at a low cost?

To sum this up, you need to know if the environment in which you operate is stable and predictable, which in today’s world presents its own challenge.

Business professionals looking at the laptop screen

Predicting the unpredictable

I think most of us would agree that the world in which we live is anything but predictable. The marketplaces in which we operate are subject to fierce competition as companies innovate to outpace their peers. Digital substitutes are disrupting traditional businesses. Climate change is accelerating the frequency of disaster events such as droughts, floods, landslides and storms. Nationalism is on the rise, impacting global supply chains and the terms of trade between nations and companies.

The COVID-19 pandemic served to amplify uncertainty to rarely seen before levels. Many companies who were yet to adopt cloud computing were left with stranded, under-utilized assets, while early cloud adopters outperformed their peers. Right now, we’re in the middle of a swing towards mass centralization (to three dominant public infrastructure clouds) in terms of IT infrastructure. At the same time, we’re seeing the emergence of edge computing!

It’s not one size fits all

Given all this unpredictability, isn’t the answer to buy or rent infrastructure to adopt the public cloud? Well, yes and no. As outlined in NTT’s Hybrid Cloud Report, cloud adoption isn’t moving as quickly as predicted.

Consumption of cloud services is growing year on year; however, several persistent barriers remain to mass, such as rapid adoption, legacy application architecture, government policies and laws, geographic and physical challenges. Not to mention the added complexity of security considerations as well. For many organizations the ability to report on their data should a breach occur is a paramount consideration, making cloud sometimes less preferable than traditional, dedicated IT environments.

If, for some companies, the cloud is not the complete answer, then what’s the alternative? Recently we’ve seen IT infrastructure providers pivot to offering hardware-as-a-service. These are not financial leases; instead, they’re services where the hardware vendor retains the assets (underpinning the services) on their books while allowing clients dedicated use of the assets deployed in a location of the client’s choosing.

At NTT, we think the reality for most clients is not binary. It’s not always buying or always renting. Some things will be predictable while others will not. In cases where companies have ready, low-cost access to capital and the use of the IT asset can be forecast with a high degree of certainty, then buying may be the best option for that business. In other situations, the uncertainty of the environment warrants a different approach, but not one that is necessarily best catered for by the public cloud.

In these circumstances, you might consider a hardware-as-service offer to better match costs to utilization, allowing your organization to respond quickly when the need arises.

If you’re looking to upgrade or refresh your IT hardware and the cloud isn’t the complete solution for your business, talk to NTT on how your business may leverage a hardware-as-a-service offer.

Nathan Vandenberg

Nathan Vandenberg

Senior Director – Technology Transformation, NTT Ltd.